Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

UNIVERSITY OF EXETER BILL

Lords Amendment considered and agreed to.

BUCKINGHAMSHIRE COUNTY COUNCIL BILL [Lords]

Read the Third time and passed, with Amendments.

BP TRADING BILL [Lords]

EAST HAM CORPORATION BILL [Lords]

Esso PETROLEUM COMPANY BILL [Lords]

Read a Second time and committed.

HASTINGS TRAMWAYS BILL [Lords]

To be read a Second time Tomorrow.

MILFORD DOCKS BILL [Lords]

TYNE IMPROVEMENT BILL [Lords]

Read a Second time and committed.

ARUNDEL ESTATE BILL [Lords] (By Order)

Second Reading deferred till Thursday.

Oral Answers to Questions — GOVERNMENT INFORMATION SERVICES

Overseas Services (Review)

Mr. Ernest Davies: asked the Chancellor of the Duchy of Lancaster (1) if he will now make a statement of the Government's conclusions in regard to the overseas information services;
(2) if he will now make a statement on the conclusions he has reached on the future of the overseas information services; and if he will publish a White Paper containing the Government's proposals.

Mr. Swingler: asked the Chancellor of the Duchy of Lancaster (1) what conclusions he has reached as a result of his survey of Britain's information services about the use being made of British films to show the British way of life; and to what extent he is arranging to make greater use of films for this purpose;
(2) if he will initiate discussions with leaders of the film industry concerning the production of films illustrating British life for the use of Britain's information services abroad.

Mr. Edelman: asked the Chancellor of the Duchy of Lancaster when the White Paper on the reorganisation of the information services will be published.

The Chancellor of the Duchy of Lancaster (Dr. Charles Hill): The conclusions of the Government, following the review of overseas information services, will be published very shortly as a White Paper. In the review, full weight has been given to the value of British films in illustrating the British way of life, and to the views expressed to me on this subject by representatives of the documentary film industry.

Mr. Davies: Can the Chancellor say what he means by "very shortly"? Is he aware that it is a month since he had this jamboree at Chequers, and that it is a month since he promised publication of the Government's conclusions within a very short time? What is holding it up now?

Dr. Hill: By "very shortly" I mean, I hope, next week.

Mr. Swingler: On the subject of films, can the Chancellor say whether he is intending to do anything about this? Does he recall the fact that there used to be a very good film unit under the Government's own control, and that it was his party which bust it up? Is it not very regrettable that the Crown Film Unit no longer exists, and is he going to do anything about it?

Dr. Hill: The hon. Member must await the White Paper to which I have referred. I can assure him that I have heard the views of the producers, and of the union representing the film industry, and these have been taken fully into account in considering the Government's decision.

Mr. Edelman: Will the right hon. Gentleman confirm in the meantime that the Government will resist the bullying of certain sections of the Press urging him to cut the information services, and will he instead strengthen the work of bodies like the British Council, which is doing such admirable work?

Dr. Hill: I must ask the hon. Gentleman to await the White Paper, in which the answer to his Question will be found.

Lung Cancer and Smoking

Mr. Lipton: asked the Chancellor of the Duchy of Lancaster what action he will take to co-ordinate the work of Government Departments in publicising the danger of lung cancer caused by smoking.

Dr. Hill: My hon. Friend the Parliamentary Secretary to the Ministry of Health, in his recent statement, described the concerted measures which the responsible Departments have taken to publicise the risk of lung cancer caused by smoking. There is and there will be co-ordination of effort in making plain the facts.

Mr. Lipton: Is it not at least halfhearted of the Government to leave the whole of this important task to the local councils? Is not the right hon. Gentleman well qualified to conduct a nationwide broadcasting campaign, this time for a useful non-party purpose, dealing with this subject? Let us have the old "Radio Doctor" back talking about health.

Dr. Hill: Statutory responsibility for health education rests with the local authorities, and through the body which, in effect, they control, the Central Council for Health Education, they can and will engage in health education on this subject.

Mr. Nabarro: What is being done to provide more smokeless fuel to reduce atmospheric pollution?

Dr. Hill: I have no doubt that my hon. Friend will address this question, as he does many others, to the appropriate Minister.

Oral Answers to Questions — PENSIONS AND NATIONAL INSURANCE

War Disablement Pensioners

Mr. Temple: asked the Minister of Pensions and National Insurance if he will take steps to give added publicity to the fact that treatment allowances which are equivalent to pension at the maximum, 100 per cent. rate, are payable when the pensioner is prevented from working by the requirements of treatment for his pensioned disability.

The Minister of Pensions and National Insurance (Mr. John Boyd-Carpenter): Yes, Sir. I have just sent to all war disablement pensioners a copy of a special leaflet which, among other things, sets out fully the conditions for payment of this and other allowances. I am sending my hon. Friend a copy.

Mr. Temple: I thank my right hon. Friend for this information which, I am sure, will be greatly appreciated by all disability pensioners.

Sir F. Medlicott: asked the Minister of Pensions and National Insurance if he will now increase the basic rate of pension for fully disabled ex-Service men to at least £4 10s. per week, with proportionate percentages for lower disablement, and an equivalent award for war widows; and if he will make a statement.

Mr. Boyd-Carpenter: I have no statement to make on this subject.

Sir F. Medlicott: Is my right hon. Friend satisfied that he and his predecessors have sufficiently taken into account the fact that here we are dealing with a steadily reducing class of pensioner; and that we ought, therefore, to be able to be rather more generous, seeing that the total claims arising are diminishing all the time?

Mr. Boyd-Carpenter: I do not dissent at all from my hon. Friend's general view. Indeed, that attitude has been reflected in our action over the last year or two.

National Assistance (Disregards)

Mr. T. Brown: asked the Minister of Pensions and National Insurance if he will introduce legislation to amend the provisions of the Second Schedule to the National Assistance Act, 1948, in order


to bring them into accordance with changes in the value of money since that date.

Mr. Boyd-Carpenter: I have no proposals for legislation on this subject at present.

Mr. Brown: The right hon. Gentleman must surely be aware that this matter has become so urgent and important that it was the subject matter of the annual conference of the British Legion and of one of the old-age pensioners' associations, and that this week it is to be discussed by the National Union of Mineworkers. Does he not realise that if he does not bring forth this legislation the penalty inflicted in 1948 will continue? People cannot be expected to wait longer than that. It is now nine years since the disregards were fixed, there has since been the change in value of money, but no attempt made by the Minister to alter the disregards. He can surely do something better than that.

Mr. Boyd-Carpenter: My recollection of the first two bodies to which the hon Gentleman referred is that they discussed many other subjects as well as this. As to his point about the value of money, that, of course, has been dealt with under successive Governments by successive increases in the rates and scales of payment, which has the advantage of giving the additional benefit against changing prices to all, whereas increases in the disregards, in the nature of things, give the additional assistance where, ex hypothesi, it is less needed than in other directions.

Mr. Marquand: Has the right hon. Gentleman discussed this matter with the Trades Union Congress? If not, will he do so?

Mr. Boyd-Carpenter: I am always prepared to receive representations, of course, from that or any other body.

Retirement and Old-Age Pensioners

Mr. Shinwell: asked the Minister of Pensions and National Insurance whether he has considered the petitions containing the signatures of several thousand electors in the Parliamentary division of Easington asking for an increase in the basic old-age pension and directing his attention to the plight of many old people who are compelled to rely on their pension

and a small amount from the National Assistance Board; and whether he will now make a statement of the Government's intentions.

Dame Irene Ward: asked the Minister of Pensions and National Insurance when, in view of the increase in the price of coal and increased rents, he proposes to add to old-age pensions.

Captain Pilkington: asked the Minister of Pensions and National Insurance whether he can yet make a statement on the Government's plans for improving the position of old-age pensioners.

Mr. Boyd-Carpenter: I cannot add to my previous statements on this subject. In reply to the right hon. Gentleman the Member for Easington (Mr. Shinwell) I would add that I have, of course, taken note of the petition forms which he was good enough to send me.

Mr. Shinwell: Will not the Minister agree that the conditions of many old-age pensioners in my constituency—and, indeed, throughout the country—have become very grave; that they find it very difficult to sustain a decent standard of living? In view of the fact that the National Assistance Board is occasionally somewhat harsh about payment of allowances in very suitable cases, would he not give some consideration to increasing the basic pension? Or are we to understand from his Answer that the Government do not intend to do anything at all about it in this or the next Session? Is that the position?

Mr. Boyd-Carpenter: With regard to the last part of the right hon. Gentleman's supplementary, I have answered the Questions on the Order paper. I certainly would not accept his general reflections on the Assistance Board, though, naturally, I would be prepared to ask it to consider any particular case in which the right hon. Gentleman felt that a wrong decision had been given. As regards the general issue, the right hon. Gentleman will be aware that though the position of all people whose incomes are fixed is, in these days, not without difficulty, the real value of the pension still remains higher by far than it has been for the greater part of the lifetime of the National Insurance scheme as a whole.

Dame Irene Ward: On a point of order, Mr. Speaker. Is it usual in this House,


when a specific question is asked about a specific constituency and a specific petition, for the Minister to answer general questions on the subject? I do not think that it is in accordance with the tradition of the House, and I do not like it at all.

Mr. Speaker: I am afraid that the hon. Lady's likes and dislikes are not a point of order. It seemed to me that the Answer given by the Minister did include the matters contained in the hon. Lady's Question. Does she wish to ask a supplementary question?

Dame Irene Ward: Yes, Mr. Speaker, I should like to ask a supplementary question, but first, further to my point of order, may I ask what protection hon. Members have, because Ministers might block every Question and get fewer supplementaries if they answered a lot of Questions together?

Mr. Speaker: I have just called on the hon. Lady to ask a supplementary question, which shows that her complaints are unfounded.

Mr. Shinwell: Further to the remarks of the hon. Lady, I understood her to raise a point of order—

Mr. Speaker: The hon. Lady said she was raising a point of order, but it turned out not to be one.

Dame Irene Ward: Will my right hon. Friend bear in mind that juggling about with figures and arguing the merits of the Opposition's policy and ours—and I think our policy is far better—[Interruption.] Would he kindly bear in mind for a future occasion that the thrifty old-age pensioners and those on small fixed incomes are much worse off relative to the rest of the people in the country? Having regard to the increase in the price of coal, and to the increase in rents, which must have affected the position of these people, when are we to have some action?

Mr. Boyd-Carpenter: As to the first part of my hon. Friend's supplementary question, I think that if she will study my supplementary answer to the right hon. Gentleman opposite she will see that I have a good deal of sympathy with much that she has said. With regard to her particular point of objection, if she will study the Question of the right hon. Member for Easington (Mr. Shinwell)—

Dame Irene Ward: I do not want to.

Mr. Boyd-Carpenter: —however repugnant she finds that exercise—she will see that, in fact, he raised the same general issue as she herself did, and it therefore seemed to me to be not discourteous, as the Answer to both must be identical, to save the time of the House by giving it in one.

Captain Pilkington: Is my right hon. Friend aware that it would be a good thing if he could say that he at least hoped to be in a position to say something about the subject some time this year, more particularly in view of the recent rumours there have been about Parliamentary salaries?

Mr. Boyd-Carpenter: I certainly cannot add to the Answer I have given this afternoon.

Mr. Shinwell: Is the Minister aware that if the hon. Lady the Member for Tynemouth (Dame Irene Ward) studied what I said she would seem to be much more intelligent than she really is?

Mr. Boyd-Carpenter: I think that a mixture, an amalgamation, of the views of the right hon. Gentleman and of my hon. Friend would be highly stimulating.

Mr. Marquand: Does the right hon. Gentleman recollect that in the debate of 25th February he said that he intended to study this question very carefully? Have his studies revealed to him that the cost of living has risen again since then, and that the cost of coal is likely to go up very shortly? How much more increase must there be before he makes a statement?

Mr. Boyd-Carpenter: If the right hon. Gentleman will himself give study similar to that which he has recommended to me, he will see that the Index of Retail Prices has moved one-fifth of one point since the time of that debate.

Mrs. Jeger: asked the Minister of Pensions and National Insurance what is the amount of family allowance and retirement pension payable to a pensioner with two children at school under 16 years of age.

Mr. Boyd-Carpenter: If the pensioner is a married man whose wife is not entitled to retirement pension on her own insurance, and who has himself earned no increments, 88s. a week. A widow,


so long as she has young children dependent on her, receives widowed mother's allowance instead of retirement pension. In the case put by the hon. Lady the amount is 73s. a week.

Mrs. Jeger: Can the Minister say when the question of the children's allowance for old-age pensioners was last looked into? Am I right in concluding that it comes to about 3s. 6d. a week? Would he not give some consideration to the possibility of raising the £2 earnings limit for pensioners who are trying to keep a young family?

Mr. Boyd-Carpenter: The hon. Lady will be aware that we raised the earnings limit for retirement pensioners to 50s., with a 6d. in the shilling provision on the next £, as recently as last summer. As for the increase made in respect of the children of retirement pensioners, I am glad to say that the hon. Lady has under-estimated the figure which, in point of fact, is not 3s. 6d., as she suggested, but 11s. 6d. for the first child and 3s. 6d. for each of the subsequent children, with family allowances added. As for the improvement in the payment for children of widowed mothers, that increase was also made last year and the rate she gets is now very nearly up to double the 1948 level.

Mr. Marquand: Will the right hon. Member tell the House whether the figures he has quoted are below the National Assistance scale and whether it does not mean that a pensioner in this predicament will have to apply to the National Assistance Board?

Mr. Boyd-Carpenter: Rather than answer a question like that off the cuff, I should, if the right hon. Gentleman does not mind, prefer to see it on the Order Paper.

Oral Answers to Questions — ELECTRICITY

Public Loans

Mr. Ridsdale: asked the Paymaster-General how much money the nationalised electricity industry has received from public funds since 1951.

The Paymaster-General (Mr. Reginald Maudling): A total of £197 million has been advanced to the industry under the provisions of Section 42 of the Finance

Act, 1956. Before this Act was passed the industry had borrowed mainly by the issue of stock.

Mr. Ridsdale: Would my right hon. Friend say how much of the capital raised since 1951 for the nationalised industry has been raised by taxes and how much by price increases? While we recognise that deficit financing is inflationary, may I ask my right hon. Friend whether he is aware that the public is becoming more and more frustrated by the failure of the nationalised boards to keep down their production costs?

Mr. Maudling: I do not think any of the money has been raised by taxes. In the last two years the proportion of capital finance coming from internal sources was about 35 to 36 per cent.

Mr. H. Hynd: Can the Minister say how this amount compares with the amount received by the agricultural industry, the shipping industry and the aircraft industry?

Mr. Maudling: Not without notice.

Electricity Boards (Salaries)

Mr. Palmer: asked the Paymaster-General what steps are being taken to carry out the recommendation of the Herbert Committee, made in January, 1956, that the Government should reconsider the levels of remuneration of Electricity Board members.

Mr. Maudling: I would refer the hon. Member to the reply given by my right hon. Friend the Prime Minister to the hon. Member for Orkney and Shetland (Mr. Grimond) on 4th June.

Mr. Palmer: Is the right hon. Gentleman aware that the continued neglect by the Government of this question is really not fair to the leaders of the nationalised industries?

Mr. Maudling: The Government are certainly not neglecting the question. My right hon. Friend the Prime Minister said that he hoped to make a statement shortly.

Nuclear Power Programme

Mr. Palmer: asked the Paymaster-General what modifications have been made to the nuclear power programme since March of this year.

Mr. Maudling: There has been no change in the programme announced on 5th March.

Mr. Palmer: Is the right hon. Gentleman aware of the statement made by his noble Friend that there have been modifications in the nuclear power programme, a statement made in public in London on 26th June? I take it that the right hon. Gentleman is in touch with his noble Friend in the other place.

Mr. Maudling: Yes, constantly. The fact is that the programme as announced to the House set a figure for the total amount of electricity to be generated. It did not specify an exact number of stations, though I think we did, in public statements, say that it might be 19. It may well be, with the increase in size of individual stations, that the number needed for the 6,000 megawatt programme will be less than 19. It is really impossible to say at the moment.

Oral Answers to Questions — MINISTRY OF POWER

Iron and Steel Industry (Report)

Mr. Nabarro: asked the Paymaster-General, having regard to the mounting demand for steel of all classes and types, whether he will make a statement concerning the proposed date of publication of the White Paper on Steel, to cover capital investment in the industry, production, estimated demand and all associated matters.

Mr. Maudling: The Iron and Steel Board's second report on the development of the iron and steel industry will be published this month.

Mr. Nabarro: Is it my right hon. Friend's intention that that report shall take the place of the White Paper on the future capital requirements of the steel industry which a few months ago, I understand, was promised to the House? Having regard to the fact that steel production and distribution is now directly within my right hon. Friend's Ministerial competence, may we have an assurance that there will be a White Paper on the future capital arrangements of the steel industry?

Mr. Maudling: When this Report is published it will be laid before both Houses of Parliament in accordance with

Section 16 (2) of the Iron and Steel Act, 1953. Whether that makes it a White Paper I cannot say, but it will produce the facts.

Sheet Steel Supplies

Mr. Gresham Cooke: asked the Paymaster-General what steps he is taking to see that the forward planning of the steel industry is such that it will provide the British motor and other exporting industries with sufficient sheet steel to enable them to compete with Continental manufacturers, particularly in view of possible Common Market developments.

Mr. Maudling: The Iron and Steel Board has informed my noble Friend that substantial expansions of steel sheet capacity are in progress, and that it is now considering further extensions of capacity with the steel industry. The Board maintains close touch with the motor and other industries, so that all requirements for steel sheet may be fully taken into account in forward planning.

Mr. Gresham Cooke: Would my right hon. Friend inform his right hon. Friend that there is a fear that if industrial production continues to rise in the next few months there may be a shortage of sheet steel later in the year, particularly for the exporting industries? Would he, therefore, do everything he can to induce the steel industry to go on increasing its sheet steel production?

Mr. Maudling: Yes. The question of the supply of sheet steel is very important, and my noble Friend is giving attention to it at the moment. I think that any possibility of shortage in the near future is likely to arise from the recession in the motor industry having led to certain delaying of orders.

Mr. Ernest Davies: Would not the position be much improved if the industry had remained nationalised?

Mr. Maudling: No.

Gas Industry (Pensions)

Mr. Elwyn Jones: asked the Paymaster-General how far, under the appropriate regulations, manual workers who have entered the gas industry since nationalisation, are eligible for any industry pension scheme.

Mr. Maudling: None of these manual workers is eligible. My noble Friend has, however, recently received proposals from the industry for a scheme which would include them.

Mr. Elwyn Jones: Could the right hon. Gentleman give an indication of the reactions of his noble Friend to the union's proposals? Could he say when some announcement is likely to be made?

Mr. Maudling: I do not think the hon. and learned Member would expect me to say any more than that my noble Friend is studying them with great care.

Steel Industry (Denationalisation)

Mr. Palmer: asked the Paymaster-General what proportion of the steel industry has now been denationalised.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell): I have been asked to reply.
About five-sixths.

Mr. Palmer: Would the hon. Gentleman care to say whether the process will be completed by the date of the next General Election?

Mr. Powell: I do not yet know the date of the next General Election.

Oral Answers to Questions — COAL

Local Fuel Overseers

Captain Pilkington: asked the Paymaster-General if further consideration can be given to the abolition of local fuel overseers in favour of regional officers.

Mr. Maudling: It has always been our policy to concentrate fuel control work in fewer offices covering larger areas, but we have found, as explained to my hon. and gallant Friend in a letter last April, that the organisation needs to be on a more local basis than could be provided by regional officers alone.

Mr. Nabarro: Sack the lot. There are far too many bungling bureaucrats.

Prices

Mr. Nabarro: asked the Paymaster-General whether he will state the reasons for the authorisation by the Minister of Power of an increase of an average of 6s. 6d. per ton in the retail price of house coal effective from 1st July, 1957.

Captain Pilkington: asked the Paymaster-General what circumstances have led to the proposed increase in the retail cost of coal.

Mr. Maudling: The increase in the pithead price of coal, which takes effect today, is necessary to meet the increasing costs of production of the National Coal Board. Retail prices of house coal are being simultaneously raised to allow merchants to recover the higher pithead prices and some increased costs of distribution.

Mr. Nabarro: Is it not a fact that the price of domestic coal has now been increased on no fewer than 30 occasions since nationalisation? Having regard to the fact that this latest price increase will lead very soon to increased prices of gas, coke, electricity, transport and steel, can my right hon. Friend say what is the wisdom of continuing to pursue a deliberately dear coal policy?

Mr. Maudling: It is not a question of a deliberately dear coal policy. The fact is that the National Coal Board is facing steeply rising costs. Wage costs are probably the largest and there are the costs of materials, such as steel, and in addition large obligations placed upon the Coal Board by Parliament in the form of the Coal Mining (Subsidence) Bill, which is going through the House, and the Mines and Quarries Act.

Mr. J. Griffiths: Is it not true that even after this increase, quality for quality, the price of British coal is still at least 20s. a ton below the price of comparable qualities in any other coalfield in Europe?

Mr. Maudling: It is certainly a good deal cheaper than European coal, but I should not like to quote the exact figure.

Captain Pilkington: Will not this inevitably result in a further increase in the cost of living, and is it not unfortunate that we cannot get more of this basic commodity at a stabilised price after having been told by so many people that nationalisation would do so much for us?

Mr. Maudling: I think that the National Coal Board is making every effort it can to keep the price of coal as low as possible, but it is facing these rising costs. I entirely agree with my hon. Friend that an increase of this size at the present moment is a very serious matter.

Mr. Hamilton: How much of this increase is due to the voluntary price freeze undertaken by the Coal Board last year in order to help out the Government in their stabilisation policy?

Mr. Maudling: I do not think that I can answer that question without notice.

Mr. Nabarro: asked the Paymaster-General how much the price of Grade 2 house coal, both in terms of money and percentage, has risen respectively in London and Kidderminster since 1st January, 1947; and, having regard to Ministerially authorised price increases in recent years, irrespective of whether the National Coal Board makes loss or profit, what steps he now proposes to take to prevent further exploitation of the consumer in domestic coal prices.

Mr. Maudling: Since 1st January, 1947, Group 2 coal has risen by about 106s. a ton, or 118 per cent., in London and about 100s. a ton, or 142 per cent., in Kidderminster. These higher prices have been necessary to meet increased costs and future prices must depend on the movement of costs.

Mr. Nabarro: Would my right hon. Friend not agree that the year before last, when the National Coal Board made a very heavy loss, the price of coal was increased on average by 18s. per ton; and that although last year the Board made a substantial profit of £13 million, the price of coal has again been put up, this time by 6s. 6d. a ton? What hope is there for the oppressed consumer if, when the Coal Board make a loss, it puts up its price heavily and when it makes a profit it still puts up its price? Is there to be no redemption in the future?

Mr. Maudling: Had my hon. Friend looked at the statement issued by the National Coal Board he would have seen from the figures that without this increase in price the Board would have faced a very large deficit again this year.

Mr. D. Jones: How does this 118 per cent. increase in the price of coal compare with the increase in the price of commodities which the Coal Board has to buy from private enterprise?

Mr. Maudling: I am afraid that I could not answer that without notice.

Dame Irene Ward: Since this is a matter of great public interest, is it not

possible, before my right hon. Friend's noble Friend gives a direction for the price of coal to be raised, that there should be a debate in the interval between the price being asked for and the Government giving permission, so that we might be given a chance to let my right hon. Friend know what consumers think about the present position—which is not very much?

Mr. Maudling: The statutory position is that the Coal Board has a responsibility for fixing its prices. It is the Coal Board's decision, which does not need the permission of my noble Friend, although, of course, there is much close consultation on these matters between the Coal Board and the Minister. Before price increases are settled and announced, of course, there is consultation with the Consumers' Councils, both domestic and industrial.

Miss Lee: Is the right hon. Gentleman aware that households are much more sensitive to changes in price of items like coal than items like steel, and would he, therefore, help us by getting out a report showing plainly that the price of coal is socially fixed much more than the price of steel, so that the consumer may know precisely how much increase there is on various important domestic items between the dates 1939, 1945 and the present time?

Mr. Maudling: The price of coal, of course, is a large, or substantial, element in the cost-of-living index, and the price of steel is not; on the other hand, the price of steel indirectly influences the price of coal to the consumer. I find the comparison a little difficult to follow.

Capital Investment

Mr. Ridsdale: asked the Paymaster-General how much capital has been invested in the coal industry since 1951.

Mr. Maudling: During the five years 1952–56 the National Coal Board invested about £387 million.

Mr. Ridsdale: Would my right hon. Friend say how much of the present price increase will go towards raising capital? Is it not possible to find some means of raising capital other than increasing the price of coal, which in itself is inflationary?

Mr. Maudling: The Coal Board has made it clear that even with this increased price it expects to realise only a fairly small surplus for 1957, and it is that small surplus alone which will be put towards financing the capital expansion of the industry.

Mr. Nicholson: Could my right hon. Friend say what proportion of that capital investment was primarily financed out of the floating debt and what proportion out of the funded debt?

Mr. Maudling: I do not think I can give an accurate answer to that question without notice.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Herring Supplies (North Sea)

Sir R. Boothby: asked the Minister of Agriculture, Fisheries and Food whether he has yet reached any tentative conclusions as a result of the investigations which have been taking place into the causes of the scarcity of herrings in the North Sea.

The Minister of Agriculture, Fisheries and Food (Mr. Derick Heathcoat Amory): My scientific staff consider that a principal cause of the scarcity of herring in the Southern North Sea is the increase of trawling for adult herring, especially on the spawning grounds in the English Channel. An appraisal of the influence of the expanded trawling for immature herring in other parts of the Southern North Sea awaits the results of investigations instituted by the International Council for the Exploration of the Sea which begin this summer.

Sir R. Boothby: Has my right hon. Friend taken note of the very sombre conclusion reached by Dr. Hodgson, his own ex-officer, in his recent book on herring fishing, that the North Sea can supply the human population but not the human population and the livestock of Europe with herring, and that the main cause of the scarcity has been the recent industrial catching of immature fish off the Dogger Bank?

Mr. Amory: I am aware of that view, and, as my hon. Friend knows, I am very far from complacent about the whole situation. Her Majesty's Government

took the initiative last autumn in bringing this matter before the International Council for the Exploration of the Sea. We called a further conference on the subject in March, and, as my hon. Friend knows, we are in favour of expanding the international Convention to include herring problems. I am certainly not feeling complacent about this subject, and we shall follow it up in every way we possibly can.

Scholarships and Diploma Courses

Commander Scott-Miller: asked the Minister of Agriculture, Fisheries and Food what assistance his Department gives in obtaining places at agricultural colleges or institutes for those recommended to be awarded a senior scholarship by the Central Scholarships Committee.

Mr. Amory: My Department is glad to give information about the centres where diploma courses are held, but candidates must obtain their own places.

Commander Scott-Miller: asked the Minister of Agriculture, Fisheries and Food whether he will state the number of applicants dealt with by the Central Scholarships Committee during the last twelve months; and the number of applicants recommended to be awarded a senior scholarship in order to pursue a diploma course at an agricultural college or institute.

Mr. Amory: Two hundred and fifty-eight applications for scholarships have been received during the last twelve months. One hundred and forty-three applicants have been interviewed by the Central Scholarships Committee. Eleven have been recommended for awards to take diploma courses at colleges or farm Institutes, and two to take diploma courses at Universities.

Commander Scott-Miller: I thank my right hon. Friend for that information. Is he aware that there is a considerable time of waiting before vacancies occur in agricultural colleges, and is there any point in giving these young men their certificates if they cannot find a place in an agricultural college for eighteen months or more?

Mr. Amory: I have that whole matter under consideration. It is perfectly true


that there is a tremendous demand at present for places at these agricultural colleges, but, of course, this particular scheme was derived from conditions many years ago. Today, the big majority of scholarships are awarded by local education authorities, and the number in current award is about 2,500.

Commonwealth Countries and Denmark (Agreements)

Mr. Champion: asked the Minister of Agriculture, Fisheries and Food if he will publish in a White Paper or in some other form the terms of the agreements arrived at with Commonwealth countries on the marketing of agricultural produce; and if he will also give the terms of the assurances given to Denmark in this connection.

Mr. Amory: The information for which the hon. Member asks has already been published either in White Papers or otherwise.

Mr. Champion: asked the Minister of Agriculture, Fisheries and Food what is his production policy for British agriculture in the light of the agreements recently made with certain Commonwealth countries and the assurances given to Denmark.

Mr. Amory: The Governments agricultural production policy is set out in the White Paper on the Annual Review and Determination of Guarantees, 1957, and the recent agreements with the Governments of Australia and New Zealand and the assurances given to Denmark do not call for any change.

Mr. Champion: Having regard to the fact that the Agreement with New Zealand, for example, states that
The two Governments will in each year exchange statements of agricultural production trends; and each will give full weight to the views of the other in the formulation of their production, marketing and import policies relating to agriculture
does it not mean that the right hon. Gentleman is not being fair with these Governments when he says that the policy of this Government in relation to production will not change in any way?

Mr. Amory: No; I do not think that it calls for any change in the policy as stated in the White Paper. We have always taken into consideration the viewpoints of the Commonwealth countries

before we have taken our decisions each year. What we have done in this Agreement is to confirm that and make rather more formal arrangements for doing so.

Major Legge-Bourke: I appreciate that the danger may not yet come to a head, but would my right hon. Friend bear in mind that, whatever may have been agreed with members of the Commonwealth as regards agricultural production in this country, if the Messina Powers' new proposals bear fruit, they may well result in our policy being completely "queered"?

Mr. Amory: I will bear that and many other matters in these difficult questions in mind.

Export of Live Cattle

Mr. Willey: asked the Minister of Agriculture, Fisheries and Food whether he will make a statement on the discussions with foreign Governments about the export of live cattle.

Mr. Hurd: asked the Minister of Agriculture, Fisheries and Food the outcome of discussions with Continental Governments on the treatment and slaughter of cattle exported from Great Britain; if he is satisfied that the objects of the Balfour Committee's recommendations will be carried out effectively; and if he will make a statement.

Mr. Hastings: asked the Minister of Agriculture, Fisheries and Food if he will make a statement as to the present position of the export of live cattle for slaughter to the Continent and, in particular, as to the result of his recent approach to the French Government as regards conditions under which cattle were disembarked at Boulogne.

Mr. Amory: This matter has been considered by a working party of experts set up by the Council of the Western European Union. The Council has approved the working party's recommendation that its conclusions should be forwarded to the Governments of the Western European Union for any necessary action. The conclusions are that there should be adequate veterinary inspection at ports in this country to ensure that only those cattle that are fit to travel are exported to the Continent; that there should be no re-export of British cattle imported for slaughter by member countries; that


the journey on the Continent should be as short as possible; and that there should be suitable lairages and arrangements for feeding and watering at slaughterhouses. The authorities of the countries concerned will endeavour to ensure that, where it is not already general practice, all British cattle will be slaughtered by electric stunning or by captive bolt pistol.
My right hon. Friend the Secretary of State for Scotland and I have decided that the export of cattle for slaughter will be permitted only to those countries which undertake that the conclusions of the working party will be complied with, that the journey after disembarkation will be limited to 100 kilometres and that the cattle will be slaughtered by one of the methods mentioned. These restrictions will have the same effect as those recommended by the Balfour of Burleigh Committee. They will be introduced as soon as the necessary arrangements can be made which I hope will be by about the end of the month.
We are grateful to the European countries which have so willingly co-operated with us in seeking a solution in this difficult matter.

Mr. Willey: Is the right hon. Gentleman aware that his statement will be greatly welcomed in all quarters and that we greatly appreciate the sense of sympathy and expedition that he has shown in this matter? Will these assurances which have been given to the Western European Union be implemented by legislation in the respective countries?

Mr. Amory: I thank the hon. Member for his remarks and I should like once again to pay tribute to the Committee under the chairmanship of Lord Balfour of Burleigh for a Report which has helped us very much in this matter. In reply to the last part of the hon. Member's question, as far as I am aware there is no need for legislation in any of the countries concerned.

Mr. T. Williams: Are we right in assuming from the right hon. Gentleman's reply that, in the nature of things, we depend upon each Government ensuring that the arrangements are fully carried out?

Mr. Amory: We shall depend on an assurance, which I think we shall get,

from each country that it will use its best endeavours to police these arrangements satisfactorily. Export licences will depend upon that.

Mr. Hastings: Is the Minister satisfied that the powers of inspection in the various countries concerned will be sufficient to ensure that there is no unnecessary cruelty to these animals?

Mr. Amory: I believe that they will be able to carry out the arrangements that are now proposed.

Captain Pilkington: Has my right hon. Friend's attention been drawn to some printed postcards widely circulated by a Liverpool association alleging that he has flagrantly and disgracefully declined to follow the recommendations of the Balfour Committee? Are these comments not very unfair and misleading? Would my right hon. Friend care to comment upon them?

Mr. Amory: I think that the observations on those postcards were unfair, because at no moment did I reject the proposals of the Balfour Committee. What I said was that I should want a little time to find a way of carrying out this particular recommendation. I believe that we have now done so and I wish very much that the association concerned had waited to see what decision was arrived at.

Mr. Royle: asked the Minister of Agriculture, Fisheries and Food if, in view of the figures given in paragraph 19 of the Report of the Committee of Enquiry into the Export of Live Cattle to the Continent for Slaughter, he will now prohibit the exportation of any cattle which have qualified for the fatstock subsidy.

Mr. Amory: No, Sir.

Mr. Royle: In view of the economic, apart from the humane, considerations of this question, is it not a matter of urgency that 500 cattle a week in the peak period on which subsidy has been paid should be devoted to the home market, for which the subsidy was designed?

Mr. Amory: After studying the matter carefully, my view is that the purely economic arguments, as divorced from the question of humanity, to which I have referred, are in favour of the continuance


of this trade, even in cattle on which subsidy has been paid. That proportion is at present under 20 per cent., but even in those cases, I believe, it is economically to the advantage both of the industry and of the Government that this trade should be allowed to continue.

Mr. Royle: Is it not a fact that even if these cattle were used for the home market, however small the proportion, they would save some importation of, say, Argentine beef?

Mr. Amory: No, I do not think so. This trade takes place only when the market in this country is relatively weak. As I say, about 80 per cent. of the trade represents a type of meat for which, in this country, there is no great demand; otherwise, the trade would not take place.

Fertilisers and Feeding Stuffs Act, 1926

Mr. Willey: asked the Minister of Agriculture, Fisheries and Food what action he is taking in view of the representations of the County Councils Association about the operation of the Fertilisers and Feeding Stuffs Act, 1926.

Mr. Amory: The representations of the Association are under consideration together with the views on them of the associations representing the fertiliser and animal feeding stuffs industries, which have now been obtained.

Mr. Willey: In view of the fact that the enforcing authorities complain that the Act was inadequate before the war, will the right hon. Gentleman treat this matter as one of urgency and see whether he can reach an early conclusion?

Mr. Amory: That is a fair request. These matters are difficult, and I think previous Governments have found certain difficulty in reaching decisions as to what exactly should be done. It is quite probable that the Act does require amendment.

Oral Answers to Questions — MINISTRY OF SUPPLY

Royal Aircraft Establishment, Farnborough (Incident)

Mr. Janner: asked the Minister of Supply whether he will make a statement about the penetration of a group of boy soldiers into Farnborough airfield on two

occasions; how these boys were able to take equipment from the premises without being challenged in any way; and what steps are being taken as a result to increase the security arrangements at the airfield and at other buildings of importance.

The Minister of Supply (Mr. Aubrey Jones): The boys burrowed under the perimeter fence at isolated parts of the Royal Aircraft Establishment at Farnborough on two occasions, once during the evening of 25th May and again in the early morning of 26th May, and escaped detection. They did not penetrate any area containing secret equipment. They took some equipment of comparatively small value, most of which has since been recovered.
This was admittedly an unfortunate experience, and while I am generally satisfied with the arrangements for protecting information and equipment, the appropriate lessons are being drawn.

Mr. Janner: While thanking the Minister for his reply, may I ask whether he is not aware that material worth about £1,040 was stolen—not stolen, but taken away? [Laughter.] I think the Minister will agree that the result of the case showed that it was a prank on the part of youngsters. Nevertheless, is he not aware that it was a serious thing to leave the place unprotected in that way? Will he take steps to see that this kind of thing does not happen?

Mr. Jones: I do not want to depreciate the significance of this, but the figure quoted by the hon. Member relates to the original cost of the equipment rather than to its present value. For the rest, I trust that the hon. Member is not asking me to advertise to the burglar exactly where I am proposing to place the bolts

Aircraft Factories (Orders)

Mr. Hunter: asked the Minister of Supply if he will investigate the position in aircraft factories which have been manufacturing military aircraft and where production has been curtailed with a view to these factories being used for the manufacture of civilian aircraft.

Mr. Aubrey Jones: Where military aircraft production is declining, it is for the companies themselves to seek other work, including civil aircraft work. They are


doing this actively, and I have every confidence that they will continue to do so.

Mr. Hunter: Will the Minister give encouragement and help to these factories, which are seeking the production of civilian aircraft, in view of the slowing-down of orders for military aircraft and the fact that in these factories there is skilled labour which is used to this type of production?

Mr. Jones: Yes, Sir. I am most anxious that production of civil aircraft should expand as the production of military aircraft decreases. My policy is very much directed to that end.

Mr. J. Griffiths: The right hon. Gentleman, I gather, said that where, because defence orders are cancelled, work at these factories is reduced, the Government regard the companies as being responsible for seeking new outlets. Do not the Government accept some responsibility to assist them in this matter?

Mr. Jones: Yes, Sir. I do accept that the Government can help by, for instance, co-ordinating the requirements of Transport Command with the requirements of the Corporations. The main task, however, of seeking orders clearly rests with the companies. For the rest, certainly we will help.

Mr. Mayhew: Is the Minister not aware that, in general, a number of Royal Ordnance factories, including Woolwich Arsenal, are quite capable of taking on civil work on occasions like this? Is it not most unfair that private firms can go elsewhere for their orders but that the R. O. F. s are prohibited from doing so?

Mr. Jones: I do not think that that supplementary is particularly related to this Question.

Oral Answers to Questions — GOVERNMENT COMMUNICATIONS BUREAU

Mr. Lipton: asked the Prime Minister if he will arrange to transfer the responsibility for supervision of the Government Communications Bureau from the Foreign Secretary to himself.

The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): I have been asked to reply. No, Sir.

Mr. Lipton: Now that a Committee has been appointed to investigate telephone tapping, would it not be wiser to defer a decision as to the future control of the Government's 'phone tapping headquarters until the Committee has reported?

Mr. Butler: I would only say that the Government Communications Bureau is a branch of the communications organisation under the control of the Foreign Secretary. It is engaged on work connected with foreign service establishments overseas.

Oral Answers to Questions — MINISTRY OF HEALTH

Opticians (Qualification)

Mr. Beswick: asked the Minister of Health why his regulations at present provide arrangements under which an optician can test and prescribe for a National Health Service patient, who attends a hospital for the purpose, but under which the same optician is not qualified to test and prescribe privately for the same patient unless holding a diploma in ophthalmology.

The Parliamentary Secretary to the Ministry of Health (Mr. J. K. Vaughan-Morgan): Because the regulations take account of the fact that when in hospital he is working in direct association with a specialist.

Mr. Beswick: Is it not, nevertheless, a fact that we have a situation in which an individual can examine and prescribe quite separately on his own if the patient comes to him in hospital, but that he is not allowed so to do if the patient comes to him in private practice? Is this not an illogical position which should be remedied?

Mr. Vaughan-Morgan: No, I do not think so. There may be a slight misunderstanding behind the hon. Member's question, but I should like briefly to say that this is a professional matter and that I do not think my right hon. Friend would feel justified in intervening to alter the professional advice which he has had.

Asian Influenza

Mr. Collins: asked the Minister of Health if the type of influenza now rife in south-east Asia has yet been identified; if he will give an assurance that


the necessary steps, including the preparation of an adequate supply of vaccine, have been taken to combat it in this country; and if he will make a statement.

Sir C. Taylor: asked the Minister of Health what steps he is taking to prevent an outbreak of Asian influenza in this country; and what plans for vaccination or other preventive measures he is proposing to introduce.

Mr. Vaughan-Morgan: My right hon. Friend cannot at present add anything to his replies to my hon. Friend the Member for Norfolk, Central (Sir F. Medlicott) on 5th June and to the hon. Member for Erith and Crayford (Mr. Dodds) on 26th June.

Mr. Collins: Have any cases of Asian influenza been notified in this country, and, if so, have any proved fatal? Is the hon. Gentleman aware of the anxiety that there may not be available sufficient supplies of the vaccine should there be a large number of cases in this country? Can he give an assurance about that?

Mr. Vaughan-Morgan: A number of persons suffering from influenza have arrived and we are awaiting laboratory confirmation of what variety of influenza it is from which they are suffering. The vaccine is now being produced on a laboratory scale. It is being tested for efficacy, and the results will be known about mid-July, but in view of the rather mild nature of the disease, it should not be assumed that vaccination would necessarily be appropriate.

Sir C. Taylor: If there is any serious danger of an epidemic of this influenza, will my hon. Friend see that the general public are informed in good time from official sources what they should do?

Mr. Vaughan-Morgan: Yes, I will certainly bear that in mind.

Prescription Charges (Diabetics)

Mr. D. Jones: asked the Minister of Health whether he is aware that diabetics still have to pay each week for their supplies for treatment, 1s. for insulin, 1s. for cotton wool, 1s. for spirits for the injections, 1s. for testing tablets and 1s. per fortnight for an injection needle, a total of 4s. 6d. every week; and what steps he proposes to take to reduce this expenditure of these sufferers.

Mr. Vaughan-Morgan: I would refer the hon. Member to the Answer given to the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) on 28th January, 1957.

Mr. Jones: Will the hon. Gentleman agree that the facts as set out in my Question are correct? Does he not think it an intolerable burden that these people should have to pay this amount week after week? Is he aware that there was recently brought to my knowledge a case of a man who has six children under 15 years of age who has to pay 4s. 6d. every week to keep himself in condition to go to work? Does he think this is really playing the game by these people?

Mr. Vaughan-Morgan: There has been a good number of Questions on this matter, and I do not think there is very much to add to previous Answers. In the case particularly of stabilised diabetics insulin sufficient for three months can be prescribed. If the hon. Member has any further facts to bring to my notice, I will certainly look into them.

Dr. Summerskill: Is the hon. Gentleman aware that in February a Question on this subject was answered by the Minister, when it was implied that a single pack would be produced for diabetics? Can the hon. Gentleman say why there have been second thoughts on this matter?

Mr. Vaughan-Morgan: I do not know that they are second thoughts. Suggestions for various packs have been made by the B. M. A. and they are being considered.

German Measles

Dr. Summerskill: asked the Minister of Health whether he will consider adding German measles to the list of notifiable diseases.

Mr. Vaughan-Morgan: My right hon. Friend has considered this and has been advised that since it cannot be effectively controlled, there is no epidemiological purpose in making it notifiable.

Dr. Summerskill: Is the hon. Gentleman aware that many authorities now believe that there is a relationship between German measles and congenital defects? In view of this, surely there should be a national record of German measles in this country?

Mr. Vaughan-Morgan: I am advised that there is evidence that German measles does have certain consequences in certain conditions, but I am also advised that in our present state of knowledge the degree of risk cannot be assessed with certainty.

Dr. Summerskill: If there is a chance of that amount of danger about which we all know, surely the cost of compiling a register is very small, compared with the danger of allowing matters to continue as they are without the knowledge which could be obtained from a register?

Mr. Nabarro: What about Norwegian spots for a change?

Mr. Vaughan-Morgan: I think we have to bear in mind the form which this disease takes, and it is no good making it notifiable if such instructions may be disregarded.

Water Supplies (Fluoridation)

Sir K. Joseph: asked the Minister of Health whether, in view of the doubts that have been expressed in certain districts on the Government's policy on fluoridation, he will make a statement.

Mr. Vaughan-Morgan: Yes, Sir. The demonstrations which are taking place in Andover, Anglesey, Kilmarnock and Watford have the Government's full and wholehearted support. Experience in the United States of America has shown how the addition of minute quantities of fluoride to water supplies which are naturally deficient in this respect can lead to a notable reduction in dental caries, which is, unfortunately, so prevalent among our children and young people. The demonstrations which are being carried out here, in close consultation with the Health Departments, are designed to show that the same results can be achieved in this country, and I am glad to have this opportunity of expressing the Government's appreciation and gratitude for the initiative and foresight shown by all these local authorities in taking part in them.

Mr. Hastings: Is the Minister aware that the amount of dental decay among young children is increasing year by year in this country, or has been increasing recently? Will he speed these researches so that their results may be made available more widely in the country?

Mr. Vaughan-Morgan: We attach very great importance indeed to these demonstrations and to all that they may mean for the future dental health of the children of the country.

Oral Answers to Questions — HOSPITALS

Design and Administration

Major Beamish: asked the Minister of Health what studies he has made in the last few years of modern hospital design and administration in other countries; and if he will study the design, operation and administration of the newly-completed Salvation Army Booth Memorial Hospital in the borough of Queens, New York, since this hospital incorporates many new labour-saving ideas which are already resulting in an increase in efficiency and in comfort for staff and patients alike.

Mr. Vaughan-Morgan: Officers of my Department have during recent years studied the design and operation of new hospitals in the United States, Canada and various countries of Western Europe. While they have not visited the hospital referred to by my hon. and gallant Friend they have had many opportunities of studying labour-saving devices which have been adopted in recently-built hospitals abroad, and this knowledge is applied in their examination of hospital building schemes in this country.

Major Beamish: Would it be possible for authorities in this country to visit this hospital to see the great economies which can be seen in its administration?

Mr. Vaughan-Morgan: We are trying to obtain some information about the hospital.

Cathlene Murray

Dr. D. Johnson: asked the Minister of Health what progress is being made in the case of Cathlene Murray, of Carlisle, now a patient in Moss Side State Institution; if he is aware that this patient, together with numerous others over the age of 25 now detained as mental defectives, will be liable to immediate discharge in event of the recommendations of the Royal Commission on the Law Relating to Mental Illness and Mental Defect becoming law; and


whether he will start this patient on a process of rehabilitation with a view to her being discharged in the care of her parents at an early date.

Mr. Vaughan-Morgan: I am making inquiries and will write to my hon. Friend.

Dr. Johnson: While thanking my hon. Friend for his reply, may I ask him, when writing to the medical superintendent, to draw his attention to paragraph 559 of the Report of the Royal Commission, in which it is recommended that medical superintendents should not be too cautious in commending discharges of patients of this kind?

Mr. Vaughan-Morgan: I have no doubt that the medical superintendent has already read the Report. I have read it twice.

Dr. D. Johnson: asked the Minister of Health if he is aware that Cathlene Murray has been detained in institutions now for over 23 years since the age of 13 years; and what treatment of a psychiatric nature she has received throughout this time.

Mr. Vaughan-Morgan: Yes, Sir. My right hon. Friend thinks it desirable, however, wherever possible, to avoid making public clinical details of a particular patients' treatment. I am writing to my hon. Friend.

Schizophrenics (Beds)

Mr. Mayhew: asked the Minister of Health how many beds in mental hospitals are occupied by patients suffering from schizophrenia.

Mr. Vaughan-Morgan: At the end of 1954, the latest date for which figures are available, the number was 54,179.

Mr. Mayhew: Does not the extent of this illness and its nature make it about the worst illness in this country, and will the hon. Gentleman ask the Medical Research Council to give it rather higher priority?

Mr. Vaughan-Morgan: The Medical Research Council, as, I think, the hon. Member probably knows, is doing a great deal to encourage research into the causes and treatment of mental illness generally, and there are some lines in

particular of biochemical and pharmacological research being pursued at the moment.

University College Hospital (Dental Department)

Dame Irene Ward: asked the Minister of Health whether he is aware that it is over nine years since the project was initiated for building a new dental department of University College Hospital; and when it is intended that the plans approved several months ago will be proceeded with.

Mr. Vaughan-Morgan: Plans were submitted in December last. They have not been approved pending consideration of the possibility of increasing the number of students. The date of building will depend on the amount of replanning which might be necessary to meet university requirements.

Dame Irene Ward: Does my hon. Friend not agree that there has been a very long delay in this matter, and can I assume that his Department will urge on a decision as quickly as possible?

Mr. Vaughan-Morgan: Yes, certainly.

Oral Answers to Questions — MEDICAL RESEARCH

Schizophrenia

Mr. Mayhew: asked the Minister of Health, as representing the Lord President of the Council, whether he is aware that highly qualified scientists are leaving Great Britain to take up schizophrenia research in other countries; and what grants were made for schizophrenia research by the Medical Research Council in the years 1952-57 inclusive.

Mr. Vaughan-Morgan: An isolated instance is known of the acceptance of a post abroad by a scientist working in the field of experimental psychiatry, but I am not aware that there is any significant exodus of trained workers in this field. Between 1952 and 1957 the annual value of grants increased from £3,000 to £11,000 and totalled about £37,000.

Mr. Mayhew: Is the hon. Gentleman aware that I can give him other names if he wishes of scientists leaving this country to take up schizophrenia research in other countries? Is he aware that there is a


feeling widespread among people in responsible positions that the reason why only a small amount of research is being done into this disease is the rather negative and traditional attitude on the part of the Medical Research Council?

Mr. Vaughan-Morgan: If the hon. Member would like to put more specific Questions down to me about lines of research which are being pursued, I think he would be very surprised. I do not think it is fair to state that the Medical Research Council is neglecting any opportunities in this matter at all. My information is what I gave the House. If the hon. Member has any further information about scientists leaving perhaps he will let me know it.

Orders of the Day — FINANCE BILL

Considered in Committee. [Progress, 27th June.]

[Sir GORDON TOUCHE in the Chair]

Consideration of postponed Clauses 35 to 39 and new Clauses further postponed, and consideration of Schedules 2, 3 and 9 postponed until after consideration of Schedules 4 to 8 and of the new Schedule (Extent of exclusion from charge to income tax of trading income arising to an Overseas Trade Corporation), standing on the Notice Paper in the name of Mr. Harold Wilson.—[ Mr. P. Thorneycroft.]

Fourth Schedule.—(OVERSEAS TRADE CORPORATIONS: MODIFICATIONS OF INCOME TAX ACTS.)

3.32 p. m.

Mr. Geoffrey Stevens: I beg to move, in page 41, line 48, at the end to insert:
2. The said section twenty-two shall not affect section three hundred and seventy-nine of the Income Tax Act, 1952 (under which the investment income of a superannuation fund approved under that section is exempt from income tax and which, by virtue of paragraph (a) of and proviso (iii) to subsection (3) of that section, only applies where the fund is established in connection with a trade or undertaking carried on wholly or partly in the United Kingdom).
The Schedule deals with certain modifications of the Income Tax Act which apply to overseas trade corporations. In Clause 22 of the Bill a clear differentiation is made between the trading profits of an overseas trade corporation exempted from United Kingdom Income Tax, and also Profits Tax, and the investment income of an overseas trade corporation. I do not quarrel with that at all, but the words of the Amendment clearly bring out that under normal Income Tax practice the income derived from the investment of superannuation funds operated by limited companies is exempt from Income Tax, and I can see no reason at all why that investment income of an overseas trade corporation should not also be exempt.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell): I would agree that it is undesirable that because a company becomes an overseas trade corporation, or hives off part of its trade to a


firm which qualifies as an overseas trade corporation, the existing benefits which are enjoyed by its employees under superannuation schemes should, as it were by a side wind, be withdrawn. I would, therefore, recommend the Committee to make this addition to the Schedule.

Amendment agreed to.

Schedule, as amended, agreed to.

Fifth Schedule.—(RELATION OF EXEMPT TRADING INCOME TO DISTRIBUTIONS.)

Mr. Powell: I beg to move, in page 43, line 28, to leave out "received by the Corporation which" and to insert:
grants or loans which under subsection (3) of section thirty-two of this Act".
The Amendment, in connection with the two following Amendments on the Notice Paper, makes the same provision where grants or loans are to be treated as dividends as is already made in the subparagraph where actual dividends are concerned, namely, for their grossing up in arriving at the trading income of the corporations. It is, therefore, little more than a drafting Amendment.

Amendment agreed to.

Further Amendments made: In page 43, line 31, leave out from "and" to first "the" in line 32.

In line 32, leave out "the dividend" and insert:
any such dividend, grant or loan".—[Mr. Powell.]

Mr. Powell: I beg to move, in page 46, line 37, at the beginning to insert:
Expenditure and receipts shall be treated as of a capital nature if, and only if, they would be so treated for income tax purposes and.

The Deputy-Chairman: It would be convenient to take with this Amendment the next Amendment, in the name of the hon. Member for Langstone (Mr. Stevens), in line 40, after "D", to insert:
and no regard shall be paid to surpluses arising on the sale of, transfer of, or on receipt of compensation for damage to any asset which would not fall to be included in the profits of the trade for such purposes".

Mr. Powell: In the first Part of the Schedule we are dealing with the computation of the trading income of an overseas trade corporation otherwise than in circumstances of winding up. The only

interest which attaches to that computation is in the allocation of dividends as between trading income and investment income. The total amount of the trading income, since as such it does' not attract tax, is not therefore, of any very significant importance, but when we come to Part II, dealing with distributions upon winding up, we are concerned with the whole of the trading income of the overseas trade corporation, since potentially that has now become subject to United Kingdom Income Tax.
In moving to Part II it is necessary to move over, broadly speaking, from ordinary accounting principles to normal Income Tax principles. The words that I propose to be inserted will ensure that expenditure and receipts shall only be treated as of a capital nature if, and only if, they are so treated for Income Tax purposes. I suggest that the Amendment logically follows from the purpose of Part II of the Schedule.

Mr. John Arbuthnot: My hon. Friend has accepted, in substance, the Amendment in the name of my hon. Friend the Member for Langstone (Mr. Stevens) and myself to which you, Sir Gordon, referred. He has done it more briefly than we did and I should like to thank him.

Amendment agreed to.

Further Amendment made: In page 47, line 9, after "stock", insert:
at the end of the period".—[Mr. Powell.]

Amendment proposed: In page 47, line 10, at end insert:
15. No deduction shall be made for sums set aside to meet a contingency except so far as those sums have been or will be employed to meet that contingency.—[Mr. J. Powell.]

Mr. G. R. Mitchison: I always ask for overtime if I am called to make a prophecy. I do not quite know what this provision means and I should like to hear about it from the Financial Secretary. I do not understand the words
… except so far as those sums … will be employed to meet that contingency.
Perhaps those who deal with tax are in a better position to know for certain whether a sum set aside for contingency will or will not be used for that purpose, but I should like to have the secret of how they do it.

Mr. Powell: I understand that at the time of the winding up it might be that the contingency for which the sums were set aside had not fully materialised, but, of course, the Inland Revenue would require to be satisfied by the firm on whom the onus of proof would rest that the sums would be absorbed in the purpose. I should add that this paragraph, like the Amendment just made to paragraph 13, is another provision to bring proper Income Tax principles into play in estimating trading profits on a winding up.

Mr. Mitchison: I am sorry, but I still do not understand. I understand the process of setting a sum aside, I understand the process of its employment, but what I do not understand is how anybody, even the company concerned, when a sum has been set aside for that purpose, can prove that it will be so employed.

Mr. Powell: I can conceive that at the time of the winding up of the firm there might, for example, be a debt outstanding, which indebtedness might arise out of a contingency for which these sums were provided. At that moment, it might not actually be true that the sums had been used, but it would, nevertheless, be certain that they must be so used.

Amendment agreed to.

Motion made, and Question proposed, That the Schedule, as amended, be the Fifth Schedule to the Bill.

Mr. Mitchison: There is one question I want to ask about this Schedule. Am I right in supposing that it definitely contemplates that on a winding up there should be a distribution in excess of the nominal capital or, if you like, the nominal capital and a capital reserve fund of the company, which may be made partly out of exempt trading income and will be treated not as a capital distribution but as an income distribution, and therefore, so far as the Inland Revenue and the company are concerned, will be subject to Income Tax?

Mr. Powell: indicated assent.

Mr. Edward du Cann: May I ask my hon. Friend a question? Am I correct in assuming that in computing the profits—I am referring particularly to paragraph 2 (1) of the Schedule the

ordinary expenses of the central management and control of the trade incurred in the United Kingdom will be taken into account?

Mr. Powell: Yes.

Question put and agreed to.

Sixth Schedule.—(CHARGE TO TAX IN RESPECT OF DISTRIBUTIONS MADE OUT OF EXEMPT TRADING INCOME.)

Mr. Powell: I beg to move in page 48, line 14, after "company", to insert:
and as if references in that subsection to the person owning shares in the Overseas Trade Corporation were references to the person to whom the grant or loan is made".
This is a drafting Amendment. Since we are here dealing not actually with dividends but with grants and loans, we should therefore make the appropriate modification.

Amendment agreed to.

Mr. Stevens: I beg to move, in page 48, line 22, at the end to insert:
and the said subsection (2) as so applied in relation to a grant or loan made to an Overseas Trade Corporation shall have effect as if the proviso were omitted".
I moved an Amendment in connection with Clause 23, and in doing so I tried to conjure up the picture of a string of overseas trade corporations, each of which was a subsidiary of a parent overseas trade corporation, which, in turn, was the subsidiary of a company registered in this country which was not itself an overseas trade corporation. If I recollect aright, my hon. Friend the Financial Secretary accepted that Amendment.
That Amendment dealt with the income received from the subsidiary companies, but the same kind of position will arise in connection with loans or grants made in a similar fashion. As the Bill is drafted there would be an anomalous position in that, according to Clause 23, income would be treated in the proper fashion, so by this Schedule grants or loans between associated overseas trade corporations would not be so treated. This Amendment is designed to put right that anomaly.

Mr. Powell: This Amendment is consequential on that which the Committee has already decided to make to Clause 23 (2) and I therefore suggest that it should be made.

Amendment agreed to.

3.45 p. m.

Mr. Powell: I beg to move, in page 48, line 22, at the end to insert:
and (d) where the payment which the person to whom the grant or loan is made is under paragraph (b) of this sub-paragraph to be deemed to have received is for the purposes of the profits tax to be included in computing the profits from a trade or business carried on by that person, subsection (3) of section twenty-six of this Act shall apply with the necessary modifications for the allowance of credit against the profits tax attributable to that payment ".
This Amendment is consequential upon an Amendment already made to Clause 26 (3), and makes the appropriate modification where the payment in question is not a dividend but is a grant or loan.

Amendment agreed to.

Mr. Stevens: I beg to move, in page 48, line 22, at the end to insert:
(d) where a grant or loan in respect of which income tax has been charged under sub-paragraph (1) of this paragraph is repaid in whole or in part, the amount of the repayment, increased by income tax at the standard rate in force when the repayment is made, shall be carried forward and set off against the next subsequent relevant distribution and if the payment exceeds that relevant distribution the excess shall be carried forward and deducted from the next following relevant distribution and so on, and to that extent the company shall not be charged in respect of those subsequent relevant distributions.

The Deputy-Chairman: This Amendment can be taken together with the next Amendment in the name of the hon. Gentleman the Member for Langstone (Mr. Stevens), namely, in page 48, line 49, at the end to insert:
and when the grant or loan is repaid paragraph (d) of sub-paragraph (1) of the foregoing paragraph shall apply as in the case of a grant or loan repaid as mentioned in that paragraph".

Mr. Stevens: One of the main objects of the formation of the tax provision for overseas trade corporations is to enable switching of funds from one O. T. C. to another. The thought behind it is that one overseas trade corporation may be successful, may accumulate profits beyond its own immediate requirements, and may switch to another O. T. C. operating in a country where perhaps the activities of the company are not so far developed.
One has to consider the definite possibility that at a particular point in time, when one corporation has been successful,

it may not be the case that an O. T. C. in another country is immediately in need of funds for development. It seems to me a pity that the surplus funds of the first corporation should be kept sterile in that corporation instead of being available for investment. I see no reason why those funds should not be invested with the parent company, if there is one. It is true that tax may be paid then, but there should be provision for repayment of tax if the subsidiary O. T. C. calls back the surplus funds and invests them in the O. T. C. operating in another country.
I have put the point as simply and plainly as I can, and I hope that my hon. Friend will be able to accept the Amendment.

Mr. Powell: As my hon. Friend has explained to the Committee, this provision would go beyond anything which is required to enable the switching of funds to take place between overseas trade corporations with a group—if I may use that loose expression. As the Bill stands it is possible for the switch to take place between the subsidiary O. T. C. and the parent, and back again, from time to time without a real liability to United Kingdom tax being attracted in the process.
What this Amendment would do would be to make it possible for the exempt trading income of an overseas trade corporation to be applied as a grant or loan by a United Kingdom company which might not be an O. T. C., and which should be liable to normal United Kingdom tax. The effect of that might be that the exempt trading income of overseas trade corporations would go to the building of businesses within the United Kingdom itself, a result which would certainly be felt to be unfair by competing firms in the United Kingdom which had no such link with an O. T. C.
I therefore suggest to my hon. Friend that for the purposes which he mentioned this Amendment is not necessary, and that its effects would certainly be open to grave criticism and would go beyond anything that he would desire.

Mr. Mitchison: I, too, thought the Amendment went much too far, but I carefully refrained from saying so for fear of inducing the Financial Secretary to accept it if I did. If I had risen earlier,


I should have said, no doubt less eloquently and with less knowledge, more or less what the Financial Secretary has said.

Amendment negatived.

Mr. Powell: I beg to move, in page 48, line 24, at the end to insert:
(3) Where a company makes a grant or loan to a person who is not an associated person under reciprocal arrangements involving the making by another party to the arrangements of a grant or loan to a person who is, in relation to that company, an associated person, this paragraph shall apply to the grant or loan made by that company as if the person to whom it is made were such an associated person.
Perhaps, Sir Gordon, we might, at the same time, consider a later Amendment, in page 48, line 49, at the end to insert:
(2) Where a company makes a grant or loan to or for the benefit of a person who is not a director or member of the company under reciprocal arrangements which involve the making by some other party to the arrangements of a grant or loan to or for the benefit of a director or member of that company, this paragraph shall apply to the grant or loan made by that company as if the person to whom it is made were a director or member of that company.
During the Second Reading debate, attention was drawn to the possibility of an avoidance device, whereby grants or loans might not be between associated overseas trade corporations but might be cross loans whereby one principal would make grants to the subsidiary of another principal and vice versa. The two Amendments are designed to close that loophole.

Mr. Mitchison: It seems to us that the Government have stopped one hole in the sieve. There are many others.

Amendment agreed to.

Mr. Powell: I beg to move, in page 48, line 47, to leave out from the beginning to "sub-paragraph".
This Amendment is consequential upon the addition of a new paragraph (d) to paragraph 1 (1).

Amendment agreed to.

Further Amendment made: In page 48, line 49, at end insert:
(2) Where a company makes a grant or loan to or for the benefit of a person who is not a director or member of the company under reciprocal arrangements which involve the making by some other party to the arrangements of a grant or loan to or for the benefit of a director or member of that company, this paragraph shall apply to the grant or loan

made by that company as if the person to whom it is made were a director or member of that company.—[Mr. Powell.]

Mr. Mitchison: I beg to move, in page 50, line 34, to leave out "liquidator" and to insert "members".

The Deputy-Chairman: It will probably be for the convenience of the Committee to consider, at the same time, the next two Amendments, in page 50, line 35, to leave out from "paragraph" to the end of line 40, and, in line 40, at the end to insert:
(3) Notwithstanding anything in the last foregoing sub-paragraph, the amount received by a member of the company in the distribution, grossed up by reference to income tax at the standard rate for the year of assessment in which the distribution is made, shall, for the purposes of sur-tax, be deemed to have been received by the member as income.

Mr. Mitchison: The Amendment that I have moved has broadly the same object and intention as the two following Amendments. The machinery suggested is a little tidier in the next two Amendments, but the substantial point is the same. The Financial Secretary was good enough to make clear what I thought we had all concluded from a perusal of the previous Schedule, that at the time of distribution the liquidator will be distributing money which is not to be treated as capital but is to be treated as income, and he will distribute as part of that money a part of the exempt trading income. If I have not got that quite right, I hope that the Financial Secretary will correct me at once. That is what I understand to be the position.
As between the Revenue and the company, there is no doubt that that distribution is income and liable to Income Tax. The Bill accordingly provides, in the passage which we now seek to amend, that the liquidator shall be assessed and charged to Income Tax on that distribution. When the money is distributed to the shareholders, the question arises whether it is income in their hands, and we understand it to be so, but not for the purposes of Surtax. That is to say, we understand that they will get a distribution, such as would be obtained anyhow on the liquidation of a company, of money which was the company's accumulated income which included some exempt trading income. Perhaps I was inaccurate in saying that it is, strictly speaking, income in their hands. It is a distribution


in liquidation. As the Bill stands at present, they will not be paying Surtax on that distribution.
Let us see what the money actually is. This is trading income which at any time could have been distributed by way of dividends to shareholders. It is a question for the overseas trade corporation whether or not it accumulates it and to what extent it accumulates it, and if it accumulates something beyond what is regarded for these purposes as strictly capital, when it comes to distribute it in winding up it is handing back to the shareholders money which but for the choice or convenience of the overseas trade corporation was at any time available to be handed over to shareholders by way of dividend.
That is, generally speaking, the position on any distribution, but the matter is complicated here because that money was exempted from tax as between the Revenue and the company under the provisions of this part of the Bill. It was exempted because it represented trading income, and, accordingly, it had that special advantage.
The question is whether the shareholders ought to be liable to Surtax on it. The first point that I want to make is that there is no provision in the Bill that liquidation should not take place with comparative frequency. Indeed, one of the cases that have been made on behalf of the general provisions of this part of the Bill is that there should be freedom to shift money and resources from one overseas trade corporation operating in a country to another, that there should be freedom to hive off.
I think it follows that there will be a great deal of manipulation—I do not use the word in an offensive sense—of these overseas trade corporations. It is quite possible that if no Surtax is to be paid on the distribution in winding up, a well-to-do person may put aside a considerable sum of money, invest it in an overseas trade corporation, and allow it to pile up in that corporation. He may then have it distributed to him, and he will thereby have avoided the Surtax which he would have paid if the money had been more regularly distributed as dividend. I agree that to some extent there is always that possibility at present, apart from the question of overseas trade corporations, and

there are, of course, provisions to deal with it, but it seems to me that, logically, at any rate in this case, there is no real reason why the money should not be made liable to Surtax on distribution.
The first suggestion about the machinery is that, instead of the liquidator of the company being assessed and charged Income Tax on the distribution, the money should actually be taxed in the hands of the members of the company. That is one way of doing it, but what is rather simpler and better is that the liquidator of the company shall be assessed and charged in respect of tax due under this paragraph, and to stop there, and then that the money so handed on to members of the company in the distribution should be treated as their income and should be "grossed up" and subject to Surtax in their hands.
4.0 p. m.
This is a rather complicated matter. I hope that I have made clear the substance and the intention of what is proposed. I can only repeat that these provisions are entirely novel, as the Government and their supporters have made perfectly clear. They have indicated their intentions in bringing them forward. They have said, at the same time, that they are extremely complicated, that they are a new venture, that they are difficult to frame correctly. Today, and last week, we have dealt with one Amendment after another, sometimes introduced by the Government, sometimes from this side of the Committee, and sometimes from the benches opposite, trying to stop up holes, perhaps, in some cases, to enlarge holes in the framework of the Bill.
This is altogether an exceedingly difficult piece of legislation for us to follow, for others to administer and for those who are concerned to understand and to operate. No one, I am sure, will disagree with that. One of the points which has struck people who have made an examination of this part of the Bill, and made it, on the whole, in no unfriendly spirit, is that in the form of distributions out of exempt trading income in the liquidation of a company it opens the door to the possibility of people avoiding Surtax which they ought to pay, that it is much better that those distributions should be taxed in the hands of members, both as to Income Tax and as to Surtax, and that the machinery proposed by the


Bill, which, of course, avoids Surtax altogether and makes the liquidator and the liquidator only liable to Income Tax in these matters, is notionally wrong and leading, in practice, to avoidance on a considerable scale.
For those reasons, we on this side of the Committee regard this matter as one of real importance. We believe that those who wish this part of the Bill to have a good effect and to have as little bad effect as can be coupled with that good should support us on a matter of this sort. We see no theoretical ground whatever for exempting these distributions, which are, of course, not capital but income distributions, from Surtax which falls generally on what is income. The short distinction is that capital distribution is another matter, but this is distributed income which should be liable to Surtax in the hands of those who are liable to pay Surtax. The form of the Bill should not provide a means of avoiding Surtax in these cases.

Mr. Donald Chapman: The Financial Secretary will recall that I mentioned this topic last week, when we were discussing Clause 24. I said that one of the reasons why I was anxious that we should vote against Clause 24 was that it was a paving Clause, so to speak, for this Schedule and that this was one of the matters in the Schedule to which we took objection. Those of us on this side of the Committee who have stated our general objection to the way in which Part IV of the Bill is intended to work have been doing our best, given the Government's case for doing the job in this way, to approach their method in a reasonable spirit and to be reasonable in our Amendments.
The whole justification for the Government's case so far has been that help is needed and assistance is justified for people who are investing in overseas trade corporations, because of the good which that is doing for this country in trading overseas and in eventually increasing our outlet for exports and so on.
What strikes us as odd is, if the justification for giving the tax concession is that the money is left in, that there should suddenly be a provision which encourages people to take it out and which gives them a tax bonus on taking it out. The whole purpose of Part IV

is to encourage people to leave their money in overseas trade corporations and to let it be doing good abroad. This provision encourages them to take it out, particularly, as the financial newspapers have pointed out, when Part IV as drafted will make overseas trade corporations attractive to Surtax payers.
That point has been made time and time again in the Financial Times and the Economist. It is a legitimate point which is presented in no carping spirit. We should not encourage Surtax payers to take out their money. If they are to be helped by these provisions, we want them to be encouraged to leave their money in.
When the Financial Secretary tries to see our point of view, as I am sure he will, I hope that he will distinguish, as many of us are trying to do, between the very legitimate companies of high repute who will not be going in and out of liquidation to suit the tax purposes of their shareholders, the sort of company in which the right hon. and learned Member for Kensington, South (Sir P. Spens) is interested, and the other companies, perhaps smaller and, in some cases larger, which use that device simply for the purpose of finding the best loopholes for tax avoidance. It is to that latter kind of company that we are directing these arguments. We know that there are people doing that and they should be not only discouraged, but made to feel the pinch by this sort of Amendment.

Mr. Powell: I hope that the hon. and learned Member for Kettering (Mr. Mitchison) will forgive me if I do not discuss the machinery of these provisions. Clearly, if the Committee decides that, in principle, this change is desirable, we can then discuss the machinery. However, I suggest to the Committee that it is not right to make the distinction now proposed between an overseas trade corporation and an ordinary resident company. When an ordinary resident company goes into liquidation, its assets, so far as they are not as it were original capital, are the accumulation of profits which have already borne United Kingdom tax.
Upon liquidation, the distribution which is made, as the hon. and learned Member said, is not liable to Surtax in


the hands of the recipient. It is true that the device of piling up reserves after tax and then receiving them in a Surtax free form upon liquidation is an avoidance device with which this Committee has had to contend in the years gone by. The provisions regarding one-man companies, with which the Committee will be familiar, are designed to meet that method of avoidance.
The Committee will recollect that these provisions are applied in their full force to overseas trade corporations by Clause 30, but I suggest that it would be quite wrong to put the shareholder in an overseas trade corporation in a worse position than a shareholder in an ordinary United Kingdom company, upon liquidation. When the provisions of the Schedule have been applied United Kingdom tax will have been paid upon the exempt trading income of the overseas trade corporation.
In the case of an overseas trade corporation the distribution should surely then be treated exactly as it is in the case of a resident company. If it is felt that there are still loopholes whereby Surtax can be avoided by means of liquidation we should make them universal and not apply them specifically to overseas trade corporations.

Mr. Mitchison: Will the Financial Secretary deal with two points? First, he says that the trading income of the company will have been liable to Income Tax. That is not right. What we are dealing with here is the part of the distribution that is to be taken as made out of exempt trading income. That may be made liable by what we are discussing now, but it has not been made liable otherwise. Will the hon. Gentleman make it quite clear that we are, in fact, dealing with trade income which will not pay tax until the distribution?
Secondly—it may have been my fault that the hon. Gentleman did not quite follow what I said—this is a distribution of the assets of the company which is not a distribution of capital. It is a distribution of income, and the hon. Gentleman himself told me so when we were discussing the previous Schedule. That is the difference between this distribution and

any other distribution on liquidation. So far as I know, any other distribution on liquidation is a distribution of capital.

Mr. Powell: On any other distribution on liquidation the assets to be distributed may well include the accumulated trading profits which have borne Income Tax. So, here, the assets may include the accumulated trading profits which have been exempt until brought under taxation by the provisions of this Schedule.

Mr. Roy Jenkins: The Financial Secretary applied himself fairly closely to the points which have been raised, but I do not think that he has answered either of the last two points raised by my hon. and learned Friend. I also think that he was basing his argument upon a slightly false hypothesis when, throughout his speech, he continually talked about the danger of the shareholder in the overseas trade corporation being put in a worse position than the shareholder in the ordinary company operating at home.
There is no doubt that one of the facts that we are dealing with in these provisions is that—perhaps accidentally from the point of view of the Government—the shareholder in the overseas trade corporation is, in a variety of ways, put in a much more favourable position than the shareholder in a home company, and there is a great incentive under the Bill to invest money abroad rather than at home.
I do not think that the Financial Secretary answered my hon. and learned Friend's last two points. I should have thought that it was highly undesirable to encourage companies enjoying overseas trade corporation status to indulge in what is virtually tax avoidance. I should have thought that there was a substantial case for considering the Amendments with a view to seeing whether, on Report, one of them could not be adapted to deal with the difficulty.
In those circumstances, I hope that my hon. Friends, as a symbol of their feelings, will press the matter to a Division.

Question put, That "liquidator" stand part of the Schedule:—

The Committee divided: Ayes 223, Noes 171.

Division No. 154.]
AYES
[4.15 p. m.


Agnew, Sir peter
Grimston, Hon. John (St. Albans)
Nicholls, Harmar


Aitken, W. T.
Grimston, Sir Robert (Westbury)
Nicholson, Godfrey (Farnham)


Alport, C. J. M.
Gurden, Harold
Nicolson, N. (B'n'm'th, E. &amp; Chr'ch)


Amery, Julian (Preston, N.)
Hall, John (Wycombe)
Nugent, G. R. H.


Amory, Rt. Hn. Heathcoat (Tiverton)
Harris, Frederic (Croydon, N. W.)
Oakshott, H. D.


Arbuthnot, John
Harris, Reader (Heston)
Orr, Capt. L. P. S.


Armstrong, C. W.
Harrison, Col. J. H. (Eye)
Osborne, C.


Ashton, H.
Harvey, Sir Arthur Vere (Macclesfd)
Page, R. G.


Baldwin, A. E.
Harvey, Ian (Harrow, E.)
Pannell, N. A. (Kirkdale)


Barber, Anthony
Harvey, John (Walthamstow, E.)
Peyton, J. W. W.


Barlow, Sir John
Hay, John
Pickthorn, K. W. M.


Barter, John
Heath, Rt. Hon. E. R. G.
Pike, Miss Mervyn


Baxter, Sir Beverley
Henderson, John (Cathcart)
Pilkington, Capt. R. A.


Beamish, Maj. Tufton
Henderson-Stewart, Sir James
Pitt, Miss E. M.


Bevins, J. R. (Toxteth)
Hicks-Beach, Maj. W. W.
Pott, H. P.


Biggs-Davison, J. A.
Hinchingbrooke, Viscount
Powell, J. Enoch


Birch, Rt. Hon. Nigel
Holland-Martin, C. J.
Price, David (Eastleigh)


Bishop, F. P.
Hornby, R. P.
Price, Henry (Lewisham, W.)


Black, C. W.
Horobin, Sir Ian
Prior-Palmer, Brig. O. L.


Bossom, Sir Alfred
Howard, Hon. Greville (St. Ives)
Profumo, J. D.


Bowen, E. R. (Cardigan)
Howard, John (Test)
Raikes, Sir Victor


Boyd-Carpenter, Rt. Hon. J. A.
Hughes Hallett, Vice-Admiral J.
Redmayne, M.


Braine, B. R.
Hughes-Young, M. H. C.
Remnant, Hon. P.


Braithwaite, Sir Albert (Harrow, W.)
Hutchison, Michael Clark (E'b'gh, S.)
Renton, D. L. M.


Bromley-Davenport, Lt.-Col. W. H.
Hylton-Foster, Rt. Hon. Sir Harry
Ridsdale, J. E.


Brooke, Rt. Hon. Henry
Iremonger, T. L.
Rippon, A. G. F.


Brooman-White, R. C.
Irvine, Bryant Godman (Rye)
Robertson, Sir David


Browne, J. Nixon (Craigton)
Jenkins, Robert (Dulwich)
Robinson, Sir Roland (Blackpool, S.)


Bullus, Wing Commander E. E.
Jennings, J. C. (Burton)
Rodgers, John (Sevenoaks)


Burden, F. F. A.
Johnson, Dr. Donald (Carlisle)
Roper, Sir Harold


Butcher, Sir Herbert
Johnson, Eric (Blackley)
Ropner, Col. Sir Leonard


Butler, Rt. Hn. R. A.(Saffron Walden)
Jones, Rt. Hon. Aubrey (Hall Green)
Russell, R. S.


Campbell, Sir David
Joseph, Sir Keith
Schofield, Lt.-Col. W.


Cary, Sir Robert
Joynson-Hicks, Hon. Sir Lancelot
Scott-Miller, Cmdr. R.


Channon, Sir Henry
Kerby, Capt. H. B.
Sharples, R. C.


Chichester-Clark, R.
Kerr, Sir Hamilton
Shepherd, William


Cole, Norman
Kershaw, J. A.
Smithers, Peter (Winchester)


Conant, Maj. Sir Roger
Kimball, M.
Soames, Christopher


Cooke, Robert
Kirk, P. M.
Spearman, Sir Alexander


Cordeaux, Lt.-Col. J. K.
Lagden, G. W.
Speir, R. M.


Craddock, Beresford (Spelthorne)
Langford-Holt, J. A.
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Crosthwaite-Eyre, Col. O. E.
Leavey, J. A.
Stevens, Geoffrey


Crowder, Sir John (Finchley)
Legge-Bourke, Maj. E. A. H.
Steward, Harold (Stockport, S.)


Cunningham, Knox
Lindsay, Hon. James (Devon, N.)
Steward, Sir William (Woolwich, W.)


Currie, G. B. H.
Lindsay, Martin (Solihull)
Storey, S.


Danoe, J. C. G.
Linstead, Sir H. N.
Stuart, Rt. Hon. James (Moray)


Davidson, Viscountess
Lloyd, Maj. Sir Guy (Renfrew, E.)
Studholme, Sir Henry


D'Avigdor-Goldsmid, Sir Henry
Low, Rt. Hon. A. R. W.
Sumner, W. D. M. (Orpington)


Digby, Simon Wingfield
Low, Rt. Hon. A. R. W.
Taylor, Sir Charles (Eastbourne)


Drayson, G. B.
Lucas, Sir Jocelyn (Portsmouth, S.)
Taylor, William (Bradford, N.)


du Cann, E. D. L.
Lucas-Tooth, Sir Hugh
Teeling, W.


Dugdale, Rt. Hn. Sir T. (Richmond)
McAdden, S. J.
Temple, John M.


Elliot, Rt. Hon. W. E. (Kelvingrove)
Macdonald, Sir Peter
Thomas, Leslie (Canterbury)


Elliott, R. W.(N'castle upon Tyne, N.)
Mackeson, Brig. Sir Harry
Thompson, Lt.-Cdr. R.(Croydon, S.)


Errington, Sir Eric
McKibbin, A. J.
Thorneycroft, Rt. Hon. P.


Farey-Jones, F. W.
Mackie, J. H. (Galloway)
Thornton-Kemsley, C. N.


Fell, A.
Maclay, Rt. Hon. John
Tiley, A. (Bradford, W.)


Finlay, Graeme
Maclean, Sir Fitzroy (Lancaster)
Turton, Rt. Hon. R. H.


Fisher, Nigel
Macleod, Rt. Hn. Iain (Enfield, W.)
Vane, W. M. F.


Fort, R.
Macmillan, Maurice (Halifax)
Vaughan-Morgan, J. K.


Foster, John
Macpherson, Niall (Dumfries)
Vickers, Miss Joan


Fraser, Hon. Hugh (Stone)
Maitland, Cdr. J. F. W. (Horncastle)
Wakefield, Edward (Derbyshire, W.)


Galbraith, Hon. T. G. D.
Maitland, Hon. Patrick (Lanark)
Wall, Major Patrick


Gammans, Lady
Marlowe, A. A. H.
Ward, Rt. Hon, G. R. (Worcester)


George, J. C. (Pollok)
Marples, Rt. Hon. A. E.
Ward, Dame Irene (Tynemouth)


Gibson-Watt, D.
Marshall, Douglas
Watkinson, Rt. Hon. Harold


Godber, J. B.
Mathew, R.
Webbe, Sir H.


Gomme-Duncan, Col. Sir Alan
Maudling, Rt. Hon. R.
Whitelaw, W. S. I.


Goodhart, Philip
Mawby, R. L.
Williams, Paul (Sunderland, S.)


Gough, C. F. H.
Maydon, Lt.-Comdr. S. L. c.
Williams, R. Dudley (Exeter)


Gower, H. R.
Milligan, Rt. Hon. W. R.
Wills, G. (Bridgwater)


Graham, Sir Fergus
Molson, Rt. Hon. Hugh
Wood, Hon. R.


Grant, W. (Woodside)
Moore, Sir Thomas



Green, A.
Morrison, John (Salisbury)
TELLERS FOR THE AYES:


Gresham Cooke, R.
Nabarro, G. D. N.
Mr. Legh and Mr. Bryan.


Grimond, J.
Neave, Airey





NOES


Ainsley, J. W.
Harrison, J. (Nottingham, N.)
Pannell, Charles (Leeds, W.)


Allaun, Frank (Salford, E.)
Hastings, S.
Parker, J.


Allen, Arthur (Bosworth)
Hayman, F. H.
Pearson, A.


Allen, Scholefield (Crewe)
Healey, Denis
Peart, T. F.


Bacon, Miss Alice
Henderson, Rt. Hn. A. (Rwly Regis)
Pentland, N.


Bellenger, Rt. Hon. F. J.
Holman, P.
Popplewell, E.


Bence, C. R. (Dunbartonshire, E.)
Holmes, Horace
Prentice, R. E.


Benn, Hn. Wedgwood (Bristol, S. E.)
Houghton, Douglas
Price, J. T. (Westhoughton)


Beswick, Frank
Howell, Charles (Perry Barr)
Probert, A. R.


Blackburn, F.
Hoy, J. H.
Randall, H. E.


Blenkinsop, A.
Hughes, Cledwyn (Anglesey)
Rankin, John


Blyton, W. R.
Hughes, Emrys (S. Ayrshire)
Redhead, E. C.


Boardman, H.
Hughes, Hector (Aberdeen, N.)
Reeves, J.


Bottomley, Rt. Hon. A. G.
Hynd, H. (Acorington)
Reid, William


Bowden, H. W. (Leicester, S. W.)
Hynd, J. B. (Atteroliffe)
Rhodes, H.


Bowles, F. G.
Irving, Sydney (Dartford)
Robinson, Kenneth (St. Pancras, N.)


Boyd, T. C.
Isaacs, Rt. Hon. G. A.
Ross, William


Braddock, Mrs. Elizabeth
Janner, B.
Royle, C.


Brockway, A. F.
Jay, Rt. Hon. D. P. T.
Shinwell, Rt. Hon. E.


Brown, Thomas (Ince)
Jeger, George (Goole)
Short, E. W.


Burke, W. A.
Jeger, Mrs. Lena (Holbn &amp; St. Pncs, S.)
Shurmer, P. L. E.


Butler, Herbert (Hackney, C.)
Jenkins, Roy (Stechford)
Silverman, Julius (Aston)


Callaghan, L. J.
Johnson, James (Rugby)
Silverman, Sydney (Nelson)


Champion, A. J.
Jones, David (The Hartlepools)
Skeffington, A. M.


Chapman, W. D.
Jones, Elwyn (W. Ham, S.)
Slater, J. (Sedgefield)


Chetwynd, G. R.
Kenyon, C.
Smith, Ellis (Stoke, S.)


Clunie, J.
Key, Rt. Hon. C. W.
Snow, J. W.


Collick, P. H. (Birkenhead)
Lawson, G. M.
Sorensen, R. W.


Collins, V. J.(Shoreditch &amp; Finsbury)
Ledger, R. J.
Soskice, Rt. Hon. Sir Frank


Craddock, George (Bradford, S.)
Lee, Frederick (Newton)
Steele, T.


Cronin, J. D.
Lee, Miss Jennie (Cannock)
Stewart, Michael (Fulham)


Crossman, R. H. S.
Lindgren, G. S.
Stones, W. (Consett)


Dalton, Rt. Hon. H.
Lipton, Marcus
Strachey, Rt. Hon. J.


Darling, George (Hillsborough)
Logan, D. G.
Strauss, Rt. Hon. George (Vauxhall)


Davies, Ernest (Enfield, E.)
Mabon, Dr. J. Dickson
Summerskill, Rt. Hon. E.


Davies, Harold (Leek)
MacColl, J. E.
Swingler, S. T.


Deer, G.
McInnes, J.
Sylvester, G. O.


Dodds, N. N.

Taylor, Bernard (Mansfield)


Donnelly, D. L.
McKay, John (Wallsend)
Thomas, Iorwerth (Rhondda, W.)


Dugdale, Rt. Hn. John (W. Brmwch)
Macpherson, Malcolm (Stirling)
Tomney, F.


Ede, Rt. Hon. J. C.
Mallalieu, E. L. (Brigg)
Ungoed-Thomas, Sir Lynn


Edelman, M.
Mallalieu, J. P. W.(Huddersfd, E.)
Viant, S. P.


Edwards, Rt. Hon. Ness (Caerphilly)
Marquand, Rt. Hon. H. A.
Watkins, T. E.


Edwards, Robert (Bilston)
Mason, Roy
Wells, Percy (Faversham)


Edwards, W. J. (Stepney)
Mayhew, C. P.
Wells, William (Walsall, N.)


Evans, Albert (Islington, S. W.)
Mellish, R. J.
West, D. G.


Fletcher, Eric
Mikardo, Ian
White, Henry (Derbyshire, N. E.)


Forman, J. C.
Mitchison, G. R.
Wilkins, W. A.


Fraser, Thomas (Hamilton)
Monslow, W.
Willey, Frederick


Gibson, C. W.
Moody, A. S.
Williams, Rev. Llywelyn (Ab'tillery)


Greenwood, Anthony
Morrison, Rt. Hn. Herbert (Lewis'm, S.)
Williams, Ronald (Wigan)


Grenfell, Rt. Hon. D. R.
Mulley, F. W.
Williams, Rt. Hon. T. (Don Valley)


Grey, C. F.
Noel-Baker, Rt. Hon. P. (Derby, S.)
Williams, W. R. (Openshaw)


Griffiths, Rt. Hon. James (Llanelly)
O'Neill, Hn. Phelim (Co. Antrim, N.)
Willis, Eustace (Edinburgh, E.)


Griffiths, William (Exchange)
Oram, A. E.
Woodburn, Rt. Hon. A.


Hall, Rt. Hn. Glenvil (Colne Valley)
Oswald, T.
Woof, R. E.


Hamilton, W. W.
Owen, W. J.



Hannan, W.
Paget, R. T.
TELLERS FOR THE NOES:




Mr. John Taylor and Mr. Rogers.

Motion made, and Question proposed, That this Schedule, as amended, be the Seventh Schedule to the Bill.

Mr. Douglas Houghton: Before we agree to add the Sixth Schedule to the Bill, there are a few comments which might usefully be made about the increasing complexity of the taxation of companies and those engaged in overseas activities, and the safeguards necessary to prevent abuse of the tax concessions which are given.
This Schedule deals with the charge to taxation in respect of distributions made

out of exempt trading income. Under these comprehensive arrangements for the exemption of profits on overseas trading activities, we have, of course, a considerable new code of safeguards necessary to prevent abuse. Hitherto, it has not been of any great concern to companies or corporations to inflate their overseas profits; now it is. Nor has it been their aim that they should extract distributions from overseas trading profits because of the substantial difference in the level of taxation.
In a speech I made during the Second Reading debate on the Finance Bill, I


suggested that industries engaged in overseas activities might be prepared to accept an omnibus anti-avoidance Clause in the Bill. I know that in this Committee and in the country that kind of comprehensive safeguard against avoidance is not regarded with approval. It places very substantial discretion and powers in the hands of the Commissioners of Inland Revenue, or an appeal tribunal.
One of the cardinal features of our taxation system is that, so far as possible, we should know what is inside and what is outside the scope of our taxation provisions. We like to know for certain where we stand, though there are many uncertainties about all attempts to define conditions of concessions and safeguards against avoidance. But, so far as possible, certainty is our aim.
In times past it has been necessary to make this sort of provision against avoidance. It was done in connection with the Excess Profits Duty in the First World War and later in connection with the Excess Profits Levy. Here, over a comparatively restricted field, are very substantial tax concessions. The measure of tax relief has already been freely discussed in our debates and in all it amounts perhaps to £30 million a year.
That is a very substantial tax relief for the limited number of companies and corporations engaged in overseas activities or at least, engaged in overseas trading activities in a form which will enable them to take advantage of these concessions. So I think it should have been possible for the Chancellor to come to terms with the representatives of those mainly concerned to avoid all this complicated legislation which has been found necessary to give effect to a perfectly simple idea.
Basically, the idea is almost simplicity itself. Yet, as we come to give effect to it, we find ourselves confronted with complicated Clauses in the Bill, a very lengthy Part IV and with Schedules of equal complexity and length. There is no doubt that this new concession will open a new business of tax avoidance and that will be regrettable.
I know that it is often argued that attempts at tax avoidance are in strict ratio with the level of taxation, but I do not think that that is confirmed by experience. In fact, I recall that there was a Select Committee of this House which,

in 1906, dealt with tax avoidance and evasion and had some strong things to say about taxpayers who employed every device they could think of to get round the terms and provisions of the law. The level of taxation in 1906 was rather low by present standards. The Royal Commission of 1919–20 also took a high moral line on tax avoidance and at that time the level of taxation was lower than it is today.
The truth is that Income Tax and railways fares have an evil fascination for some people. They must dodge them if they can. Certainly, in the matter of Income Tax on companies and corporations there is no doubt that today far too many professional and business brains in this country are employed in considering ways and means of lowering the tax burden within the law. The law is stretched and ways are found round it. The smallest loopholes are discovered and, if possible, enlarged.
What is the reason? Is it a reduction of social morality on the part of the taxpaying public? Is it something inherent in all systems of taxation which we just have to live with and legislate against so far as possible? Is there any hope of bringing about a higher standard of morality in this connection?
I use the word "morality" because, although I know that learned judges and others have from time to time pronounced on the subject, I still doubt whether the citizen is entitled to arrange his affairs in an artificial way for the express purpose of reducing the tax burden below that which I think any reasonable person would say was the intention of the legislature.

Viscount Hinchingbrooke: The hon. Gentleman uses the word "artificial". Why not say it is a convenient way, otherwise people would not do it?

4.30 p. m.

Mr. Houghton: Call it convenient or artificial, I put it this way: that arrangements are made which are not necessarily in the interests of the company or corporation for any other purpose except that of taxation.
It is highly artificial. There is no trading involved. There is nothing whatever which increases the prosperity of the


company or facilitates its trading operations. Many of the artificial arrangements made have as their sole purpose the lowering of the taxation burden on a company or a corporation, or the lowering of the taxation burden on those individuals who will profit from it.
This evasion arrangement took these two forms. It is not only the company and the corporation itself seeking to reduce its tax burden. That, perhaps, can be condoned to a further point than the desire of individuals to profit from these transactions. A company may argue that all this is grist to the trade mill; that it will increase the prosperity of the company and facilitate its trading operations, and, in the long run, add to the national income and improve our balance of payments.
That may be an argument. But this Sixth Schedule deals with conditions under which distribution shall be made, mostly to individuals, from trading profits which have been exempted under the main Clauses of Part IV of the Bill. There is no doubt that a great many people will want to get money out of overseas trade corporations, just as they want to get money out of any other business enterprise. If they can get any advantages individually from the concessions given on the taxation of the profits of overseas trade corporations, they will want to get more, if they can, rather than less.
So, I think that the Sixth Schedule raises again this general issue, which is constantly troubling the administration, the Chancellor and this Committee, of how to introduce adequate safeguards against avoidance and evasion in order to sustain the repute and equity of our fiscal system.
There never will be any end to this until the Committee decide, as a matter of policy, that it will write into our fiscal code omnibus provisions against avoidance activities. That is the conclusion to which I have come with great reluctance because I know the difficulties that will create and that many people will say that they will never know for certain where they stand under the law.
Yet what is the alternative? Each year there is one worthy claimant taken out of the queue of cases waiting the attention of this Committee and the House in the

loopholes which are discovered. When we come to Clause 35 we shall be discussing similar ones relating to Estate Duty. There is a limited time available in the House and in the Committee to deal with these complex matters, and each attempt to close a loophole gives rise to fresh difficulties of interpretation and further complexities in the safeguards which have to be introduced.
What is the answer? Does anyone in the Committee know the answer, if it is not to have some overriding power to stop these activities? Otherwise, I am afraid that we shall continue to deal with avoidance devices slowly, belatedly and only when they become a matter of free gossip among those in business circles and in the financial columns of the Press, and tax avoidance devices are spoken of as if they were something respectable in the City of London. I therefore again give my opinion to the Committee that this is a serious social question. It is one which will now be aggravated by the concessions which are being given in Part IV of the Bill and which the Sixth Schedule is designed to cope with so far as possible.
There is no doubt that Part IV, the agreed Schedules and the Sixth Schedule will be a nightmare from the administration point of view, and that they will occupy the time of many business executives, managements and professional people seeking to get the best out of them and to see whether there are any weaknesses in the provisions against avoidance and abuse of the concession. The Inland Revenue has freely acknowledged that in this field it has little experience of this kind of concession for overseas trading activities. It is something new. It is something which is bound to bring, in the course of experience, new opportunities for studying the behaviour of the taxpayers concerned and of their professional advisers.
I think that we are bound to acknowledge that in giving effect to Part IV, to the provisions of Clause 23 and the Sixth Schedule, which enlarge the conditions upon which a charge to tax can be made upon distribution from exempted profits for overseas trading activities, we are merely enlarging the scope of avoidance activities and adding other difficulties to the already complex problems of administration.

Mr. Chapman: May I put this case to the Financial Secretary? He will recall that I put a specific example to him the other day and that he was able to satisfy me to some extent by referring to some tax avoidance legislation. I will come back to that in a minute.
Under the first part of the Bill and the Sixth Schedule, a grant or loan made to associated persons out of exempted trading income is regarded as taxable, to put it briefly. Suppose we take an example of this sort of grant or loan especially in one-man or small, director-controlled companies—I do not mean small in size, but small in the number of people in control over them.
Take the sort of grant or loan on which the company might want to avoid paying tax. It might want to supply one of its directors with a house abroad out of its tax-exempt income, to enjoy the house at leisure for holiday purposes, for example. If a loan were made to that director out of exempt trading income to purchase the house, tax would have to be paid on the money involved, but let us suppose that the company decides to buy the house out of its tax-free reserves as a legitimate form of storing its capital overseas, and that it grants a lease of the house to director A, B, or C at a peppercorn rent.
This will be the sort of thing which the director wanted in the first place, a house bought out of exempt trading income. Whether he gets it from the company on a 99-year lease at a nominal rent or as a freehold in his own name will not matter if he is substantially in control of the company.
There may be a roundabout way of dealing with this case and I hope there is. It will be to the good if the Financial Secretary can assure me on the point. As a corollary of what I have been saying, I put it to him that this is the sort of exercise that will be going on in the minds not of people like myself, not versed in the control of personal overseas companies, but of people who are versed in these things and who have very powerful legal advice to help them to discover every possible loophole.
I beg of the Financial Secretary to realise that many of us feel that this is not just one case that the Financial Secretary can write off by saying, "There you

are. Everything will be quite satisfactory." There will be many such cases that wide people can pull out of the bag.

Viscount Hinchingbrooke: What is wrong with it?

Mr. Chapman: The noble Lord asks what is wrong with it. It happens to be the sort of case to which my hon. Friend the Member for Sowerby (Mr. Houghton) was referring.
It is not avoidance of the law, but avoidance of the whole spirit and principle of the law by finding out loopholes after others have been stopped up, to reach the desired end. Parliament could go on legislating like this, and we should continually find other loopholes giving the tax avoider the desired end that he had in mind in the first place.
When I gave the Financial Secretary an example of avoidance the other day he mentioned Section 412 of the 1952 Income Tax Act, and he assured me that the case I then had in mind could be prevented. I looked up that Section. Suppose I transfer my shares in a company to Bermuda and this company receives there for me my tax-exempt income, which piles up there. It is all very well to say that Section 412 effectively stops that, but perhaps that is not what happens. I have a feeling that the Board of Inland Revenue is not capable of checking up on transactions when they are nicely done in a roundabout fashion.
I would not be so foolish, if that transaction were going to be caught, as to try to transfer my assets and shares directly to my private company in Bermuda. I would do it in a roundabout way. First, I would transfer them to another company in this country and it would transfer them to trustees. I can give an example from inside this country where that goes on.
These trustees then have some less illegitimate means of transferring the assets abroad. The Income Tax inspector is busy, at one remove and almost by hearsay, trying to track what is going on. He is trying to check on the last transaction and to link it with the first one. That is the roundabout way of getting around the law that is going on. It prevents the Income Tax inspector from linking


up ultimate transactions with initial transactions.
That is what worries me. When I read complicated legislation like this Schedule I feel that the more we complicate the law here the more, at each point, further complications will be developed in order to get round it. It is a matter of great concern to us and we feel that it will be developed further if the Sixth Schedule is put into operation.
We beg all Government supporters to realise that we are not attacking the substantial, respectable company which is doing the job of Britain abroad but people who deliberately use these provisions to get tax-free income. We believe that the Schedule will increase to a substantial degree the number of people doing that.

4.45 p. m.

Mr. Mitchison: On this side of the Committee, we are not satisfied with the Schedule. Some of its complexity and difficulty may be due to a fault in the principle of the Bill rather than in the terms of the Schedule. We are not at all happy about it, particularly in relation to the exempt trading income when winding up a company and in relation to people who pay Income Tax and Surtax. We shall, therefore, divide against it.

Mr. Powell: Before the Committee divides, perhaps I might answer specific points which were put to me by the hon. Member for Northfield (Mr. Chapman). He and I have had an instructive time

dodging one another through the corridors of the 1952 Income Tax Act. On the case he has put to me I think he will find that Section 162 of that Act, which deals with benefits in kind to directors, is probably satisfactory for this purpose. He will recognise that, where the transfer was detected, Section 412 would deal with the case which he put to me the other day.

The hon. Member says, generally, "Here is a piece of legislation which, since it exempts certain trading income in certain circumstances must, by its nature, multiply the possibilities of evasion." We are trying to remove the disadvantage under which a resident company suffers merely because it is resident in this country. An otherwise identical company trading in an identical way, but which is not resident, has all the advantages which we are seeking to confer by the Bill.

We are trying to remove a discrimination against the resident company. It seems to me to weigh very little in the scale if a few extra avoidance possibilities are in some way created in the process, as the hon. Gentleman suggests.

Mr. Mitchison: If the Financial Secretary has some confidence that he is, in fact, doing that, why does he continue to let companies migrate?

Question put, That this Schedule, as amended, be the Sixth Schedule to the Bill:—

The Committee divided: Ayes 231, Noes 184.

Division No. 155.]
AYES
[4.49 p. m.


Agnew, Sir Peter
Braithwaite, Sir Albert (Harrow, W.)
Dance, J. C. G.


Aitken, W. T.
Bromley-Davenport, Lt.-Col. W. H.
Davidson, Viscountess


Alport, C. J. M.
Brooke, Rt. Hon. Henry
D'Avigdor-Goldsmid, Sir Henry


Amery, Julian (Preston, N.)
Brooman-White, R. C.
Deedes, W. F.


Amory, Rt. Hn. Heathcoat (Tiverton)
Browne, J. Nixon (Craigton)
Digby, Simon Wingfield


Arbuthnot, John
Bryan, P.
Drayson, G. B.


Armstrong, C. W.
Bullus, Wing Commander E. E.
du Cann, E. D. L.


Ashton, H.
Burden, F. F. A.
Dugdale, Rt. Hon. Sir T. (Richmond)


Astor, Hon. J. J.
Butcher, Sir Herbert
Elliot, Rt. Hon. W. E. (Kelvingrove)


Atkins, H. E.
Butler, Rt. Hn. R. A.(Saffron Walden)
Elliott, R. W.(N'castle upon Tyne, N.)


Baldwin, A. E.
Campbell, Sir David
Errington, Sir Eric


Barber, Anthony
Cary, Sir Robert
Farey-Jones, F. W.


Barlow, Sir John
Channon, Sir Henry
Fell, A.


Barter, John
Chichester-Clark, R.
Finlay, Graeme


Baxter, Sir Beverley
Clarke, Brig. Terence (Portsmth, W.)
Fisher, Nigel


Beamish, Maj. Tufton
Cole, Norman
Fletcher-Cooke, C.


Bevins, J. R. (Toxteth)
Conant, Maj. Sir Roger
Fort, R.


Biggs-Davison, J. A.
Cooke, Robert
Foster, John


Birch, Rt. Hon. Nigel
Cordeaux, Lt.-Col. J. K.
Fraser, Hon. Hugh (Stone)


Bishop, F. P.
Corfield, capt. F. V.
Galbraith, Hon. T. G. D.


Black, C. W.
Craddock, Beresford (Spelthorne)
Gammans, Lady


Body, R. F.
Crosthwaite-Eyre, Col. O. E.
George, J. C. (Pollok)


Bossom, Sir Alfred
Crowder, sir John (Finchley)
Gibson-Watt, D.


Bowen, E. R. (Cardigan)
Cunningham, Knox
Godber, J. B.


Boyd-Carpenter, Rt. Hon. J. A.
Currie, G. B. H.
Gomme-Duncan, Col. Sir Alan




Goodhart, Philip
Lindsay, Martin (Solihull)
Remnant, Hon. P.


Gough, C. F. H.
Linstead, Sir H. N.
Renton, D. L. M.


Gower, H. R.
Lloyd, Maj. Sir Guy (Renfrew, E.)
Ridsdale, J. E.


Graham, Sir Fergus
Low, Rt. Hon. A. R. W.
Rippon, A. G. F.


Grant, W. (Woodside)
Lucas, Sir Jocelyn (Portsmouth, S.)
Robertson, Sir David


Green, A.
Lucas-Tooth, Sir Hugh
Robinson, sir Roland (Blackpool, S.)


Gresham Cooke, R.
McAdden, S. J.
Rodgers, John (Sevenoaks)


Grimond, J.
Macdonald, Sir Peter
Roper, Sir Harold


Grimston, Hon. John (St. Albans)
Mackeson, Brig. Sir Harry
Ropner, Col. Sir Leonard


Grimston, Sir Robert (Westbury)
McKibbin, A. J.
Russell, R. S.


Gurden, Harold
Mackie, J. H. (Galloway)
Schofield, Lt.-Col. W.


Hall, John (Wycombe)
Maclay, Rt. Hon. John
Scott-Miller, Cmdr. R.


Harris, Frederic (Croydon, N. W.)
Maclean, Sir Fitzroy (Lancaster)
Sharples, R. C.


Harris, Reader (Heston)
Macleod, Rt. Hn. Iain (Enfield, W.)
Shepherd, William


Harrison, Col. J. H. (Eye)
Macmillan, Maurice (Halifax)
Smithers, Peter (Winchester)


Harvey, Sir Arthur Vere (Maoclesfd)
Macpherson, Niall (Dumfries)
Soames, Christopher


Harvey, Ian (Harrow, E.)
Maitland, Hon. Patrick (Lanark)
Spearman, Sir Alexander


Harvey, John (Walthamstow, E.)
Marlowe, A. A, H.
Speir, R. M.


Hay, John
Marples, Rt. Hon. A. E.
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)


Heath, Rt. Hon. E. R. G.
Marshall, Douglas
Stevens, Geoffrey


Henderson, John (Cathcart)
Mathew, R.
Steward, Harold (Stockport, S.)


Henderson-Stewart, sir James
Maudling, Rt. Hon. R.
Steward, Sir William (Woolwich, W.)


Hicks-Beach, Maj. W. W.
Mawby, R. L.
Storey, S.


Hinchingbrooke, Viscount
Maydon, Lt.-Comdr. S. L. C.
Stuart, Rt. Hon. James (Moray)


Holland-Martin, C. J.
Milligan, Rt. Hon. W. R.
Studholme, Sir Henry


Hope, Lord John
Molson, Rt. Hon. Hugh
Sumner, W. D. M. (Orpington)


Hornby, R. P.
Moore, Sir Thomas
Taylor, Sir Charles (Eastbourne)


Horobin, Sir Ian
Nabarro, G. D. N.
Taylor, William (Bradford, N.)


Howard, Hon. Greville (St. Ives)
Neave, Airey
Teeling, W.


Howard, John (Test)
Nicholls, Harmar
Temple, John M.


Hughes Hallett, Vice-Admiral J.
Nicholson, Godfrey (Farnham)
Thomas, Leslie (Canterbury)


Hutchison, Michael Clark (E'b'gh, S.)
Nicolson, N.(B'n'm'th, E. &amp; Chr'ch)
Thompson, Lt.-Cdr. R.(Croydon, E.)


Hylton-Foster, Rt. Hon. Sir Harry
Nugent, G. R. H.
Thorneycroft, Rt. Hon. P.


Iremonger, T. L.
Oakshott, H. D.
Thornton-Kemsley, G. N.


Irvine, Bryant Godman (Rye)
Orr, Capt. L. P. S.
Tiley, A. (Bradford, W.)


Jenkins, Robert (Dulwich)
Osborne, C.
Turton, Rt. Hon. R. H.


Jennings, J. C. (Burton)
Page, R. G.
Vane, W. M. F.


Johnson, Dr. Donald (Carlisle)
Pannell, N. A. (Kirkdale)
Vaughan-Morgan, J. K.


Johnson, Eric (Blackley)
Peyton, J. W. W.
Vickers, Miss Joan


Jones, Rt. Hon. Aubrey (Hall Green)
Pickthorn, K. W. M.
Wakefield, Edward (Derbyshire, W.)


Joseph, Sir Keith
Pike, Miss Mervyn
Wall, Major Patrick


Joynson-Hicks, Hon. Sir Lancelot
Pilkington, Capt. R. A.
Ward, Rt. Hon. G. R. (Worcester)


Kerby, Capt. H. B.
Pitt, Miss E. M.
Ward, Dame Irene (Tynemouth)


Kerr, Sir Hamilton
Pott, H. P.
Watkinson, Rt. Hon. Harold


Kershaw, J. A.
Powell, J. Enoch
Whitelaw, W. S. I.


Kimball, M.
Price, David (Eastleigh)
Williams, Paul (Sunderland, S.)


Kirk, P. M.
Price, Henry (Lewisham, w.)
Williams, R. Dudley (Exeter)


Lagden, G. W.
Prior-Palmer, Brig. O. L.
Wills, G. (Bridgwater)


Lancaster, Col. C. G.
Profumo, J. D.
Wood, Hon. R.


Langford-Holt, J. A.
Raikes, Sir Victor
Woollam, John Victor


Leavey, J. A.
Rawlinson, peter



Legge-Bourke, Maj. E. A. H.
Redmayne, M.
TELLERS FOR THE AYES:


Lindsay, Hon. James (Devon, N.)
Rees-Davies, W. R.
Mr. Legh and Mr. Hughes-Young.




NOES


Ainsley, J. W.
Clunie, J.
Grenfell, Rt. Hon. D. R.


Allaun, Frank (Salford, E.)
Coldrick, W.
Grey, C. F.


Allen, Arthur (Bosworth)
Collick, P. H. (Birkenhead)
Griffiths, Rt. Hon. James (Llanelly)


Allen, Scholefield (Crewe)
Collins, V. J.(Shoreditch &amp; Finsbury)
Griffiths, William (Exchange)


Bacon, Miss Alice
Craddock, George (Bradford, S.)
Hall, Rt. Hn, Glenvil (Colne Valley)


Bellenger, Rt. Hon. F. J.
Cronin, J. D.
Hamilton, W. W.


Bence, C. R. (Dunbartonshire, E.)
Crossman, R. H. S.
Hannan, W.


Benn, Hn. Wedgwood (Bristol, S. E.)
Dalton, Rt. Hon. H.
Harrison, J. (Nottingham, N.)


Benson, G.
Darling, George (Hillsborough)
Hastings, S.


Beswick, Frank
Davies, Ernest (Enfield, E.)
Hayman, F. H.


Blackburn, F.
Davies, Harold (Leek)
Healey, Denis


Blenkinsop, A.
Deer, G.
Henderson, Rt. Hn. A. (Rwly Regis)


Blyton, W. R.
Delargy, H. J.
Hewitson, Capt. M.


Boardman, H.
Dodds, N. N.
Hobson, C. R. (Keighley)


Bottomley, Rt. Hon. A. G.
Donnelly, D. L.
Holman, P.


Bowden, H. W. (Leicester, S. w.)
Dugdale, Rt. Hn. John (W. Brmwch)
Holmes, Horace


Bowles, F. G.
Ede, Rt. Hon. J. C.
Houghton, Douglas


Boyd, T. C.
Edelman, M.
Howell, Charles (Perry Barr)


Braddock, Mrs. Elizabeth
Edwards, Rt. Hon. Ness (Caerphilly)
Hoy, J. H.


Brockway, A. F.
Edwards, Robert (Bilston)
Hughes, Cledwyn (Anglesey)


Brown, Thomas (Ince)
Edwards, W. J. (Stepney)
Hughes, Emrys (S. Ayrshire)


Burke, W. A.
Evans, Albert (Islington, S. W.)
Hughes, Hector (Aberdeen, N.)


Butler, Herbert (Hackney, C.)
Fletcher, Eric
Hynd, H. (Accrington)


Callaghan, L. J.
Forman, J. C.
Hynd, J. B. (Attercllffe)


Champion, A. J.
Fraser, Thomas (Hamilton)
Irving, Sydney (Dartford)


Chapman, W. D.
Gibson, C, W.
Isaacs, Rt. Hon. G. A.


Chetwynd, G. R.
Greenwood, Anthony
Janner, B.







Jay, Rt. Hon. D. P. T.
Oram, A. E.
Sorensen, R. W.


Jeger, George (Goole)
Oswald, T.
Soskice, Rt. Hon. Sir Frank


Jeger, Mrs. Lena (Holbn &amp; St. Pncs, S.)
Owen, w. J.
Steele, T.


Jenkins, Roy (Stechford)
Padley, W. E.
Stewart, Michael (Fulham)


Johnson, James (Rugby)
Paget, R. T.
Stones, W. (Consett)


Jones, David (The Hartlepools)
Paling, Rt. Hon. W. (Dearne Valley)
Strachey, Rt. Hon. J.


Jones, Elwyn (W. Ham, S.)
Pannell, Charles (Leeds, W.)
Strauss, Rt. Hon. George (Vauxhall)


Kenyon, C.
Parker, J.
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Key, Rt. Hon. C. w.
Pearson, A.
Summerskill, Rt. Hon. E.


King, Dr. H. M.
Peart, T. F.
Swingler, S. T.


Lawson, G. M.
Pentland, N.
Sylvester, G. O.


Ledger, R. J.
Popplewell, E.
Taylor, Bernard (Mansfie'd)


Lee, Frederick (Newton)
Prentice, R. E.
Thomas, Iorwerth (Rhondda, W.)


Lee, Miss Jennie (Cannock)
Price, J. T. (Westhoughton)
Tomney, F.


Lindgren, G. S.
Probert, A. R.
Ungoed-Thomas, Sir Lynn


Lipton, Marcus
Proctor, W. T.
Viant, S. P.


Logan, D. G.
Randall, H. E.
Watkins, T. E.


Mabon, Dr. J. Dickson
Rankin, John
Wells, Percy (Faversham)


MacColl, J. E.
Redhead, E. C.
Wells, William (Walsall N.)


McInnes, J.
Reeves, J.
West, D. G.


McKay, John (Wallsend)
Re[...]d, William
Wheeldon, W. E.


MacPherson, Malcolm (Stirling)
Rhodes, H.
White, Henry (Derbyshire, N. E.)


Mallalieu, E. L. (Brigg)
Robens, Rt. Hon. A.
Wilkins, W. A.


Mallalieu, J. P. W. (Huddersfd, E.)
Robinson, Kenneth (St. Pancras, N.)
Willey, Frederick


Marquand, Rt. Hon. H. A.
Ross, William
Williams, Rev. Llywelyn (Ab'tillery)


Mason, Roy
Royle, C.
Williams, Ronald (Wigan)


Mayhew, C. P.
Shinwell, Rt. Hon. E.
Williams, Rt. Hon. T. (Don Valley)


Mellish, R. J.
Short, E. W.
Williams, W. R. (Openshaw)


Mikardo, Ian
Shurmer, P. L. E.
Willis, Eustace (Edinburgh, E.)


Mitchison, G. R.
Silverman, Julius (Aston)
Woodburn, Rt. Hon. A.


Monslow, W.
Silverman, Sydney (Nelson)
Woof, R. E.


Moody, A. S.
Skeffington, A. M.
Yates, V. (Ladywood)


Morrison, Rt. Hn. Herbert (Lewis'm, S.)
Slater, J. (Sedgefield)
Younger, Rt. Hon. K.


Mulley, F. w.
Smith, Ellis (Stoke, S.)



Oliver, G. H.
Snow, J. W.
TELLERS FOR THE NOES:




Mr. John Taylor and Mr. Rogers.

Seventh Schedule.— [OVERSEAS TRADE CORPORATIONS: MODIFICATIONS OF PROFITS TAX ENACTMENTS.)

Mr. Powell: I beg to move, in page 54, line 14, to leave out from the beginning to the second "the" in line 31 and to insert:
9.—(1) Where under section twenty-two of the Finance Act, 1937 (which authorises a principal company to give a grouping notice in respect of a company which is its subsidiary for profits tax purposes, such a notice is in force and the principal company which gave the notice or the subsidiary company to which the notice applies is an Overseas Trade Corporation, the provisions of subsection (1) of section twenty-six of this Act and of paragraphs 1 and 2 of this Schedule shall be applied for determining the profits or losses of the subsidiary company before, and not after, the profits or losses of the subsidiary company are, under the provisions of subsection (2) of the said section twenty-two, treated as profits or losses of the company which gave the notice.
(2) Where such a notice is in force and both the principal company and the subsidiary company are Overseas Trade Corporations, trading income arising to the subsidiary company in a chargeable accounting period to which the notice relates shall for the purposes of subparagraph (3) of paragraph 3 of this Schedule be included in the trading income of the principal company for the corresponding chargeable accounting period (as defined in the said section twenty-two).
(3) Where on a date when such a notice is in force the principal company or the subsidiary company becomes an Overseas Trade Corporation.

In general, the effect of a grouping notice is to enable the profits and losses of firms within a group to be treated as though they were the profits and losses of a single firm. Clearly, where a group includes firms which are and firms which are not overseas trade corporations it would be quite wrong that the trading profits and losses which are treated as exempt in the case of the overseas trade corporations should be grouped in this way with the profits and losses of the firms which are not overseas trade corporations.
It is for that reason that, as the Bill is drafted, a grouping notice is not applicable to what I might call mixed groups, that is, groups some of the members of which are overseas trade corporations and others are not. It is, however, reasonable to argue that at any rate, as regards their investment income—the income which attracts no benefit under the provisions of Part IV—the groups which include overseas trade corporations should not be at a positive disadvantage. The effect, therefore, of the two new subsections will be to enable a grouping notice to take effect in relation to the investment income only of overseas trade corporations in a mixed group where a grouping notice is given. That is the practical effect of the change proposed.

5.0 p. m.

Mr. Stevens: In so far as I understand the Amendments tabled in the name of my right hon. Friend, and the explanation given by the Financial Secretary to the Treasury, the effect of this Amendment will be very similar, even if it does not go the whole of the way, to that of the Amendments which my hon. Friend and I have tabled. If my understanding of that is correct, I should like to offer my grateful thanks to my hon. Friend for having gone a long way to meet us.

Mr. Mitchison: I am sorry to introduce even the faintest note of discord, but I am not at all happy about this Amendment. Is it really necessary that this should be done? This is carrying the distinction between the investment income and the trading income of this peculiar type of corporation further into a field into which it would not have been extended, as I understand it, but for this Amendment. It allows a grouping notice to be given in relation to investment income and not otherwise. We have not had a statement from the Financial Secretary as to the circumstances in which he thinks this would be required, and I find it a little difficult to see what practical purpose the extension of this concession in this direction is to serve. Perhaps the hon. Gentleman will tell us.

Mr. Powell: I should have thought that it was reasonable if a group of companies, before Part IV of this Bill becomes law, can have the advantages of the grouping provisions of the Income Tax Acts, that in so far as their profits are not affected by Part IV of the Bill, that is to say, as far as they relate to investment income, these advantages should not be withdrawn. That is simply the effect of the Amendment.

Mr. Mitchison: I am sorry to press the Financial Secretary further about this, but this is a case where a part, but not the whole, of the income of a company can be grouped. Is there any other case in which part of the income of the company can be grouped?

Mr. Powell: There is no other case in which the trading income of a company which is resident is exempt, and we are making a new provision for that purpose. I am only suggesting that we should not associate with it a new disadvantage.

Mr. Mitchison: It is not a new disadvantage. What is happening is that a special tax concession is being given in certain cases, and all the Financial Secretary is saying to the Committee is that it seems to him to be reasonable that a further new and unprecedented concession should be made in connection with a grouping of income because a new and unprecedented concession has been made generally in Part IV of the Bill.

Amendment agreed to.

Mr. Stevens: I beg to move, in page 55, to leave out lines 40 to 42 and to add:
during which the company is an Overseas Trade Corporation.

The Temporary Chairman (Sir Norman Hulbert): I think it would be for the convenience of the Committee if the Amendment in the name of the right hon. and learned Member for Kensington, South (Sir P. Spens), to the Eighth Schedule, page 56, line 43, to leave out from "assessment" to end of line 2 on page 57, and to insert:
in which the company qualified as an Overseas Trade Corporation
were taken along with this Amendment.

Mr. Stevens: As I understand, we are also to discuss certain other Amendments to the Eighth Schedule, and all these Amendments really go together.
Clause 27 provides that there shall be an annual determination of status as an overseas trade corporation, and the last two paragraphs of the Seventh Schedule and the whole of the Eighth Schedule deal with certain provisions necessary if a change of status takes place.
I think it is a little unfortunate that, as by the very nature of things a company can be an overseas trade corporation one year, not be an overseas trade corporation another year and in the third year become an overseas trade corporation again, because of these provisions in the Seventh and Eighth Schedules, losses available in the year in which the company was an overseas trade corporation are, as it were, rubbed out by the year in which it was not an overseas trade corporation, and are not available when it becomes an overseas trade corporation again. The same thing is true of capital allowances, and the same thing can be applied to terminal losses and the spread over.
I do not want to weary the Committee by going through each of these Amendments in turn. I think I have said enough to indicate the general situation, as I see it, which this series of Amendments is intended to put right.

Mr. Powell: It would be simplest to regard this Amendment and the others in the name of my hon. Friend as being in the nature of kangaroo Amendments. They would enable a company to jump over the period in which it is an overseas trade corporation for the purpose of allowing losses, capital allowances, and so on, to count against tax. I think that the Committee has generally been agreed that more specific provision will require to be made, and my right hon. Friend has undertaken to do so on the Report stage, to cover the cases of corporations opting in and out of overseas trade corporation status. I think there is general agreement that there will have to be a quite strict limitation upon the power of companies to do so, as, otherwise, the process might well give rise to a considerable amount of tax avoidance.
Against that background, I suggest to my hon. Friend that this is really a point which ought to be picked up in that context; that, in general, the trading position of a company when it turns over from being an ordinary company to being an overseas trade corporation should at that point be brought to a conclusion for Income Tax purposes and a fresh start made.

Mr. Stevens: I fully follow my hon. Friend's point, but he is dealing solely with the event that there might be an election for overseas trade corporation status. Clause 27 provides that there shall be an annual determination, irrespective of election, so that it might well be accidental.

Mr. Powell: That is true, and it might also be artificial, by means of a company deliberately qualifying or disqualifying itself, as the case may be. We have to look at this problem of the overseas trade corporation's losses in the light of whatever falls to be done to regulate the passage of companies to and from overseas trade corporation status.
I would, therefore, ask my hon. Friend to realise that this problem is a part of the larger context, and to see whether

it cannot be met within the ambit of the Amendments which my right hon. Friend proposes to make at a later stage.

Mr. Mitchison: I rise only to say that I am very glad to know that the Financial Secretary has not been carried away on the back of a kangaroo, or even of a group of kangaroos.

Mr. Stevens: In view of what my hon. Friend has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That this Schedule, as amended, be the Seventh Schedule to the Bill.

Mr. John Cronin: Overseas trade corporations are a fascinating subject but, at this stage, the fascination has probably been substantially diminished for hon. Members, and those of us who still have an unabated enthusiasm for the subject should, perhaps, restrain themselves, as one has to bear in mind the progress of the Bill as a whole. Nevertheless, I feel that these matters should be gone into carefully.
If I speak briefly, it is not because the case against the Seventh Schedule is a short one. The arguments against it are, indeed, so multitudinous that we could debate them until an advanced hour this evening. Fortunately, much of the ground has been covered by our debate on Clause 26, when my right hon. and hon. Friends expressed in considerable detail their disapprobation of the whole question of overseas trade corporations being free from the necessity of paying Profits Tax. There are, however, one or two specific matters here to which one must refer.
For instance, paragraph 3 makes a very large change in the abatement under Section 33 of the Finance Act, 1947. That Section allowed small firms to be free of the necessity to pay Profits Tax on profits which were less than £2,000, and allowed them to have an abatement, in that they were allowed to reduce their profits by one-fifth of the difference between the amount of profits and £12,000. Paragraph 3 reduces the figures from £2,000 to £500 and from £12,000 to £3,000 respectively. This seems to be rather a severe blow to small firms which might happen to be overseas trade corporations. It seems rather unfair that a concession which was given to them for very good


and adequate reasons should be withdrawn simply because they achieve that status.
There is also the question of distributions on liquidation. If the Schedule stays as it is, firms which are overseas trade corporations and which go into liquidation do not have to pay Profits Tax on the distributions on liquidation, even though those distributions exceed the amount of the nominal capital. This leaves a very wide loophole for tax avoidance, and one which should be narrowed. It is obviously unfair to other payers of Profits Tax in that they must carry a greater burden.

The strongest case against the Schedule, of course, is that it leads to a propensity for overseas trade corporations to go into liquidation. It will tend to have the effect of destroying the whole purpose of Part IV. We on this side feel that there are substantial arguments against the Schedule. It arouses in us a considerable sense of disquiet, and I will certainly suggest to my right hon. and hon. Friends that they vote against it.

Question put:—

The Committee divided: Ayes 236, Noes 187

Division No. 156.]
AYES
[5.13 p. m.


Agnew, Sir Peter
Elliot, Rt. Hon. W. E. (Kelvingrove)
Johnson, Eric (Blackley)


Aitken, W. T.
Elliott, R, W.(N'castle upon Tyne, N)
Jones Rt. Hon. Aubrey (Hall Green)


Alport, C. J. M.
Errington, Sir Eric
Joseph, Sir Keith


Amery, Julian (Preston, N.)
Farey-Jones, F. W.
Joynson-Hicks, Hon. Sir Lancelot


Amory, Rt. Hn. Heathcoat (Tiverton)
Fell, A.
Kaberry, D.


Arbuthnot, John
Finlay, Graeme
Keegan, D.


Armstrong, C. W.
Fisher, Nigel
Kerby, Capt. H. B.


Ashton, H.
Fletcher-Cooke, C.
Kerr, Sir Hamilton


Astor, Hon. J. J.
Fort, R.
Kershaw, J. A.


Atkins, H. E.
Foster, John
Kimball, M.


Barber, Anthony
Fraser, Hon. Hugh (Stone)
Kirk, P. M.


Barlow, Sir John
Galbraith, Hon. T. G. D.
Lagden, G. W.


Barter, John
Gammans, Lady
Lancaster, Col. C. G.


Baxter, Sir Beverley
George, J. C. (Pollok)
Langford-Holt, J. A.


Beamish, Maj. Tufton
Gibson-Watt, D.
Leavey, J. A.


Bevins, J. R. (Toxteth)
Godber, J. B.
Legge-Bourke, Maj. E. A. H.


Biggs-Davison, J. A.
Gomme-Duncan, Col. Sir Alan
Legh, Hon. Peter (Petersfield)


Birch, Rt. Hon. Nigel
Goodhart, Philip
Lennox-Boyd, Rt. Hon. A. T.


Bishop, F. P.
Gough, C. F. H.
Lindsay, Hon. James (Devon, N.)


Black, C. W.
Gower, H. R.
Lindsay, Martin (Solihull)


Body, R. F.
Graham, Sir Fergus
Linstead Sir H. N.


Bossom, Sir Alfred
Grant, W. (Woodside)
Lloyd, Maj. Sir Guy (Renfrew, E.) 


Boyd-Carpenter, Rt. Hon. J. A.
Green, A.
Low, Rt. Hon. A. R. W.


Braine, B. R.
Gresham Cooke, R.



Braithwaite, Sir Albert (Harrow, W.)
Grimond, J.
Lucas, Sir Jocelyn (Portsmouth, S.)


Bromley-Davenport, Lt.-Col. W. H.
Grimston, Hon. John (St. Albans)
Lucas, P. B. (Brentford &amp; Chiswick)


Brooke, Rt. Hon. Henry
Grimston, Sir Robert (Westbury)
Lucas-Tooth, Sir Hugh


Brooman-White, R. C.
Gurden, Harold
McAdden, S. J.


Browne, J. Nixon (Craigton)
Hall, John (Wycombe)
Macdonald, Sir Peter


Bullus, Wing Commander E. E.
Harris, Frederic (Croydon, N. W.)
Mackeson, Brig. Sir Harry


Burden, F. F. A.
Harris, Reader (Heston)
McKibbin, A. J.


Butcher, Sir Herbert
Harrison, Col. J. H. (Eye)
Mackie, J. H. (Galloway)


Butler, Rt. Hn. R. A.(Saffron Walden)
Harvey, Sir Arthur Vere (Macclesfd)
Maclay, Rt. Hon. John


Campbell, Sir David
Harvey, Ian (Harrow, E.)
Maclean, Sir Fitzroy (Lancaster)


Cary, Sir Robert
Harvey, John (Walthamstow, E.)
Macleod, Rt. Hn. Iain (Enfield, W.)


Channon, Sir Henry
Hay, John
Macmillan, Maurice (Halifax)


Chichester-Clark, R.
Heath, Rt. Hon. E. R. G.
Macpherson, Niall (Dumfries)


Clarke, Brig. Terence (Portsmth, W.)
Henderson, John (Cathcart)
Maitland, Cdr. J. F. W. (Horncastle)


Cole, Norman
Henderson-Stewart, Sir James
Maitland, Hon. Patrick (Lanark)


Conant, Maj. Sir Roger
Hicks-Beach, Maj. W. W.
Marlowe, A. A. H.


Cooke, Robert
Hinchingbrooke, Viscount
Marples, Rt. Hon. A. E.


Cordeaux, Lt.-Col. J. K.
Holland-Martin, C. J.
Marshall, Douglas


Corfield, Capt. F. V.
Hope, Lord John
Mathew, R.


Craddock, Beresford (Spelthorne)
Hornby, R. P.
Mawby, R. L.


Crosthwaite-Eyre, Col. O. E.
Hornsby-Smith, Miss M. P.
Maydon, Lt.-Comdr. S. L. C.


Crowder, Sir John (Finchley)
Horobin, Sir Ian
Milligan, Rt. Hon. W. R.


Cunningham, Knox
Howard, Hon. Greville (St. Ives)
Molson, Rt. Hon. Hugh


Currie, G. B. H.
Howard, John (Test)
Moore, Sir Thomas


Dance, J. C. G.
Hughes Hallett, Vice-Admiral J.
Nabarro, G. D. N.


Davidson, Viscountess
Hughes-Young, M. H. C.
Neave, Airey


Davies, Rt. Hn. Clement (Montgomery)

Nicholls, Harmar


D'Avigdor-Goldsmid, Sir Henry
Hutchison, Michael Clark (E'b'gh, S.)
Nicholson, Godfrey (Farnham)


Deedes, W. F.
Hylton-Foster, Rt. Hon. Sir Harry
Nicolson, N.(B'n'm'th, E. &amp; Chr'ch)


Digby, Simon Wingfield
Iremonger, T. L.
Nugent, G. R. H.


Doughty, C. J. A.
Irvine, Bryant Godman (Rye)
Oakshott, H. D.


Drayson, G. B.
Jenkins, Robert (Dulwich)
Orr, Capt. L. P. S.


du Cann, E. D. L.
Jennings, J. C. (Burton)
Osborne, C.


Dugdale, Rt. Hn. Sir T. (Richmond)
Johnson, Dr. Donald (Carlisle)
Page, R. G.




Pannell, N. A. (Kirkdale)
Rodgers, John (Sevenoaks)
Teeling, W.


Peyton, J. W. W.
Roper, Sir Harold
Temple, John M.


Pick thorn, K. W. M.
Ropner, Col. Sir Leonard
Thomas, Leslie (Canterbury)


Pike, Miss Mervyn
Russell, R. S.
Thompson, Lt.-Cdr. R.(Croydon, S.)


Pilkington, Capt. R. A.
Schofield, Lt.-Col. W.
Thorneycroft, Rt. Hon. P.


Pitt, Miss E. M.
Scott-Miller, Cmdr. R.
Thornton-Kemsley, C. N.


Pott, H. P.
Sharples, R. C.
Tiley, A. (Bradford, W.)


Powell, J. Enoch
Shepherd, William
Turton, Rt. Hon. R. H.


Price, David (Eastleigh)
Smithers, Peter (Winchester)
Vane, W. M. F.


Price, Henry (Lewisham, W.)
Soames, Christopher
Vaughan-Morgan, J. K.


Prior-Palmer, Brig. O. L.
Spearman, Sir Alexander
Vickers, Miss Joan


Profumo, J. D.
Speir, R. M.
Wakefield, Edward (Derbyshire, W.)


Raikes, Sir Victor
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Wall, Major Patrick


Rawlinson, Peter
Stevens, Geoffrey
Ward, Rt. Hon. G. R. (Worcester)


Redmayne, M.
Steward, Harold (Stockport, S.)
Ward, Dame Irene (Tynemouth)


Rees-Davies, W. R.
Steward, Sir William (Woolwich, W.)
Whitelaw, W. S. I.


Remnant, Hon. P.
Storey, S.
Williams, Paul (Sunderland, S.)


Renton, D. L. M.
Stuart, Rt. Hon. James (Moray)
Williams, R. Dudley (Exeter)


Ridsdale, J. E.
Studholme, Sir Henry
Woollam, John Victor


Rippon, A. G. F.
Sumner, W. D. M. (Orpington)



Robertson, Sir David
Taylor, Sir Charles (Eastbourne)
TELLERS FOR THE AYES:


Robinson, Sir Roland (Blackpool, S.)
Taylor, William (Bradford, N.)
Mr. Wills and Mr. Bryan.




NOES


Ainsley, J. W.
Hall, Rt. Hn. Glenvil (Colne Valley)
Mulley, F. W.


Allaun, Frank (Salford, E.)
Hamilton, W. W.
Noel-Baker, Rt. Hon. P. (Derby, S.)


Allen, Arthur (Bosworth)
Hannan, W.
Oliver, G. H.


Allen, Scholefield (Crewe)
Harrison, J. (Nottingham, N.)
Oram, A. E.


Bacon, Miss Alice
Hastings, S.
Oswald, T.


Bellenger, Rt. Hon. F. J.
Hayman, F. H.
Owen, W. J.


Benn, Hn. Wedgwood (Bristol, S. E.)
Healey, Denis
Padley, W. E.


Benson, G.
Henderson, Rt, Hn. A. (Rwly Regis)
Paget, R. T.


Beswick, Frank
Hewitson, Capt. M.
Paling, Rt. Hon. W. (Dearne Valley)


Blackburn, F.
Hobson, C. R. (Keighley)
Panned, Charles (Leeds, W.)


Blenkinsop, A.
Holman, P.
Parker, J.


Blyton, W. R.
Holmes, Horace
Pearson, A.


Boardman, H.
Houghton, Douglas
Peart, T. F.


Bottomley, Rt. Hon. A. G.
Howell, Charles (Perry Barr)
Pentland, N.


Bowden, H. W. (Leicester, S. W.)
Hoy, J. H.
Popplewell, E.


Bowles, F. G.
Hughes, Cledwyn (Anglesey)
Prentice, R. E.


Boyd, T. C.
Hughes, Emrys (S. Ayrshire)
Price, J. T. (Westhoughton)


Braddock, Mrs. Elizabeth
Hughes, Hector (Aberdeen, N.)
Price, Phillips (Gloucestershire, W.)


Brockway, A. F.
Hunter, A. E.
Probert, A. R.


Brown, Thomas (Ince)
Hynd, H. (Accrington)
Proctor, W. T.


Burke, W. A.
Hynd, J. B. (Attercliffe)
Randall, H. E.


Butler, Herbert (Hackney, C.)
Irving, Sydney (Dartford)
Rankin, John


Callaghan, L. J.
Isaacs, Rt. Hon. G. A.
Redhead, E. C.


Champion, A. J.
Jay, Rt. Hon. D. P. T.
Reeves, J.


Chapman, W. D.
Jeger, George (Goole)
Reid, William


Chetwynd, G. R.
Jeger, Mrs. Lena (Holbn &amp; St. Pncs. S.)
Rhodes, H.


Clunie, J.
Jenkins, Roy (Stechford)
Robens, Rt. Hon. A.


Coldrick, W.
Johnson, James (Rugby)
Robinson, Kenneth (St. Pancras, N.)


Collick, P. H. (Birkenhead)
Jones, Rt. Hon. A. Creech (Wakefield)
Ross, William


Collins, V. J.(Shoreditch &amp; Finsbury)
Jones, David (The Hartlepools)
Royle, C.


Craddock, George (Bradford, S.)
Jones, Elwyn (W. Ham, S.)
Shinwell, Rt. Hon. E.


Cronin, J. D.
Kenyon, C.
Short, E. W.


Crossman, R. H. S.
Key, Rt. Hon. C. W.
Shurmer, P. L. E.


Dalton, Rt. Hon. H.

Silverman, Julius (Aston)


Darling, George (Hillsborough)
King, Dr. H. M. 
Silverman, Sydney (Nelson)


Davies, Ernest (Enfield, E.)
Lawson, G. M.
Skeffington, A. M.


Davies, Harold (Leek)
Ledger, R. J. 
Slater, J. (Sedgefield)


Deer, G.
Lee, Frederick (Newton)
Smith, Ellis (Stoke, S.)


Delargy, H. J.
Lee, Miss Jennie (Cannock)
Snow, J. W.


Dodds, N. N.
Lindgren, G. S.
Sorensen, R. W.


Donnelly, D. L.
Lipton, Marcus
Soskice, Rt. Hon. Sir Frank


Dugdale, Rt. Hn. John (W. Brmwch)
Logan, D. G.
Steele, T.


Ede, Rt. Hon. J. C.
Mabon, Dr. J. Dickson
Stewart, Michael (Fulham)


Edelman, M.
MacColl, J. E.
Stones, W. (Consett)


Edwards, Rt. Hon. Ness (Caerphilly)
McInnes, J.
Strachey, Rt. Hon. J.


Edwards, Robert (Bilston)
McKay, John (Wallsend)
Strauss, Rt. Hon. George (Vauxhall)


Edwards, W. J. (Stepney)
MacPherson, Malcolm (Stirling)
Stross. Dr. Barnett (Stoke-on-Trent, C.)


Evans, Albert (Islington, S. W.)
Mallalieu, E. L. (Brigg)
Summerskill, Rt. Hon. E.


Fienburgh, W.
Mallalieu, J. P. W. (Huddersfd, E.)
Swingler, S. T.


Fletcher, Eric
Marquand, Rt. Hon. H. A.
Sylvester, G. O.


Forman, J. C.
Mason, Roy
Taylor, Bernard (Mansfield)


Fraser, Thomas (Hamilton)
Mayhew, C. P.
Thomas, Iorwerth (Rhondda, W.)


Gibson, C. W.
Mellish, R. J.
Tomney, F.


Greenwood, Anthony
Mikardo, Ian
Ungoed-Thomas, Sir Lynn


Grenfell, Rt. Hon. D. R.
Mitchison, G. R.
Viant, S. P.


Grey, C. F.
Monslow, W.
Watkins, T. E.


Griffiths, Rt. Hon. James (Llanelly)
Moody, A. S.
Wells, Percy (Faversham)


Griffiths, William (Exchange)
Morrison, Rt. Hn. Herbert (Lewis'm, S.)
Wells, William (Walsall, N.)







Wheeldon, W. E.
Williams, Ronald (Wigan)
Yates, V. (Ladywood)


White, Henry (Derbyshire, N. E.)
Williams, Rt. Hon, T. (Don Valley)
Younger, Rt. Hon. K.


Wigg, George
Williams, W. R. (Openshaw)



Wilkins, W. A.
Willis, Eustace (Edinburgh, E.)
TELLERS FOR THE NOES:


Willey, Frederick
Woodburn, Rt. Hon. A.
Mr. Taylor and Mr. Rogers.


Williams, Rev. Llywelyn (Ab'tillery)
Woof, R. E.

Eighth Schedule agreed to.

Clause 35.—(GIFTS INTER VIVOS.)

Mr. John Hall: I beg to move, in page 29, line 3, to leave out subsections (1) to (9) and to insert:
(1) Where property comprised in a gift inter vivos is deemed for purposes of Estate Duty to pass on the death of the donor and such property was not a sum of money in sterling then, whether or not the property was settled by the gift, the enactments relating to Estate Duty in respect of gifts inter vivos shall have effect as if the property comprised in the gift had been a sum of money in sterling equal in amount to the principal value at the date of the gift of the property actually comprised therein.

The Solicitor-General (Sir Harry Hylton-Foster): I am sorry to interrupt, but I wondered whether it would be for the convenience of the Committee to consider at the same time the other Amendment in the name of my hon. Friend the Member for Wycombe (Mr. John Hall), in page 32, line 1, to leave out subsections (12) and (13) and to insert:
(12) Where any property is deemed to pass on a death by virtue of section forty-three of the Finance Act, 1940, by reason of a disposition or determination of an interest limited to cease on the death within the meaning of that section then for the purposes of duty chargeable on the death the property in which the interest subsisted shall be taken to have been a sum of money in sterling equal in amount to the principal value at the date of such disposition or determination of the property in which such interest subsisted.
If my hon. Friend thought that to be the right course, I think it would be to the advantage of the Committee.

Mr. Hall: It was my intention to ask whether we could take the two together.

The Temporary Chairman: Very well.

Mr. Hall: The effect of the two Amendments is twofold. First of all, they ensure that gifts are valued at the date of the gift and expressed in terms of cash and, secondly, they reduce the rather complicated Clause, with its fifteen subsections, to a simpler Clause with only six subsections. In view of the length and complication of existing fiscal legislation, that second effect alone should attract support from both sides of the

Committee. I have left subsection (10) in the Clause, although I very much doubt whether this is necessary. In any event, this subsection adds some complications which I hope will be discussed later. If it were omitted the Clause would be even shorter.
The purpose of Clause 35 is to prevent the avoidance of Estate Duty, achieved mainly by the operation of what used to be called "the disappearing trick". The Clause as it stands also has the effect, whether intentional or not, of remedying an existing injustice whereby a donee who is given property is assessed on the value of that property at the date of the death of the donor, if that donor dies within the five-year period, even though the original property the subject of the gift may long since have been sold at a figure much below the value at which that property is finally assessed. The Clause remedies that, provided, of course, that the amount which is obtained for the property sold remains in cash. If it is reinvested, he is assessed on the value of the property or shares in which he has reinvested.
What the Clause does not do is to remedy anomalies which result from the differentiation of treatment between gifts of cash and gifts of property—a differentiation which leads to some difficulty and, in some cases, I suggest, to injustice. Let me give some examples. If the donee is a recipient of cash, then there is no doubt, once that gift is completed, that, should he later become liable to Estate Duty on the gift, the Estate Duty will be assessed upon the amount of the cash. There is no doubt about that. The amount is easily ascertainable. If, through wise investment, he has managed during the intervening period to treble or even quadruple the value of that gift in his hands, that makes no difference at all; he is still assessed on the value of the cash at the date of the gift.
If, however, the donor decided that rather than disturb an existing shareholding or a holding in a company, private or otherwise, he would make a gift of shares; and if later the donee sold


those shares, reinvested the proceeds and, through the same wise speculation, trebled or quadrupled the amount, he would this time be assessed on the value of the shares or property held in his hands at the date of the death of the donor. There is a tremendous difference in treatment between the two types of gift.
For example, if the donor decides that he will give my right hon. Friend the Chancellor a sum of money which enables him to purchase a house, then at the death of the donor my right hon. Friend will be assessed on the gift of the cash only; but if, instead of that, a house to the exact value is transferred into the name of my right hon. Friend, then should that house increase in value, as house property tends to increase in value these days, my right hon. Friend will find himself assessed at the greater value of that house.
These seem to me to be anomalies, and my Amendments are designed to put them right. As I understand the basis of duty on gifts, it is to ensure that a donor or testator shall not divest himself of part of his property by gifts and thus evade Estate Duty, and the attempt which the Treasury makes is to try to arrive at what would have been the value of such a gift had it remained in the hands of the donor and been in his hands at the date of his death.
That seems to rest upon a false assumption, that a donee will treat a gift in exactly the same way as a donor would have treated it had it remained in his possession. In fact, two people handling the same asset may produce quite different results. A donee might, in fact, by investment or speculation or development, be able vastly to increase the value of a gift, whereas, had it remained in the hands of the original donor and formed part of his estate at the date of the death, the value might have been very different. I suggest, therefore, that the assumption on which this form of legislation is based is false.
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The Amendments have the merit, I suggest, first, of simplifying the existing law on the subject; secondly, of ensuring that both donor and donee know the value of the gift which the one is prepared to make and the other prepared—indeed, no doubt. happy—to accept at the date

of the gift; thirdly, of removing the uncertainty which occurs from time to time in deciding whether a gift is, in fact, in cash, in kind or in property; and, lastly, of removing the unfair effect of discrimination in treatment for estate duty purposes between gifts of cash and gifts of property to which I referred.
The valuation of gifts as at the date of gift is not a difficult matter. It can be carried out in the manner envisaged by subsection (14) of the existing Clause. The suggestion I put is not dissimilar from the system of gift tax which exists in America, which, I understand, does not give rise to any particular difficulty. I am confident that the Amendments will achieve the aim which my right hon. Friend has in mind, of stopping a particular type of tax evasion, whilst at the same time, ensuring greater equity of treatment in the cases to which I have referred, which, if Clause 35 remains in its present form, will continue to exist.

The Solicitor-General: I am grateful to my hon. Friend the Member for Wycombe (Mr. John Hall) for the concise and clear way in which he has moved his Amendment. I greatly agree with him in wishing that the Clause were not so turgid in appearance, and one would welcome any method of dealing with the problem which produced the increased simplicity to which he refers. On that ground alone, therefore, I hope that he will be expecting us to have sound reasons for not adopting the method he has suggested, which would lead to such an increase in simplicity.
In our view, the real ground which makes it impossible to adopt my hon. Friend's suggestion is that it would produce a great increase in hardship—hardship which does arise now in some cases under the existing law, but which would greatly be increased by it. I hope that I can make the point quite shortly. My hon. Friend and the Committee will understand that the essential reason for a difference of treatment between an absolute gift of money and a gift of another kind of property is that money loses its identity forthwith; even if it is reinvested, it usually passes through a bank account and gets in an unidentifiable state. On the other hand, one is able to deal justly with other forms of property if one can identify it through


its various transformations down to the point where it is converted into cash.
The difficulty about my hon. Friend's proposal for valuation at the date of the gift throughout instead of at the date of the death of the donor arises in cases where the donee keeps the gift down to the date of the death of the donor and the value of the property given depreciates. That is the case to which I did not understand my hon. Friend to be referring, but which does, by its very nature, create the difficulty. The point is the same for both Amendments which we are discussing. There is a pair of dates to be considered. In relation to the first Amendment it is the date of the gift on the one hand and the date of the death of the donor on the other, and, in relation to the second one, it is the gap between the disposition or determination of the life interest on the one hand and the death of the tenant for life on the other. The gap may, of course, be anything up to five years. During the five years, the property may depreciate very materially in value in the hands of the donee. We have to deal with Estate Duty where, in appropriate instances, the rate of Duty goes up to as much as 80 per cent., and that, of course, would mean that quite a modest depreciation in the value of the property would altogether take away any kind of benefit in the gift from the donee, if one chose to take the value of the property at the date of the gift, as my hon. Friend suggests. This, primarily, was the reason for our feeling that we could not adopt this method.
I do not want to revive the dead racehorse; the Committee is, no doubt, weary already of hearing about it, but perhaps I may just take one instance. Let us suppose that the racehorse dies while in the possession of the donee, so that it has no prospect whatever of winning any more races, at least in this world. In that case, according to my hon. Friend's suggestion, the value on which the duty would have to be paid would be the value of the horse when it was alive at the time of the gift. It might be a little harsh on the racehorse owner, after the horse had left this world for some time, to have to pay on that value.

Mr. Mitchison: May I remind the right hon. and learned Gentleman that the race-

horse in question never lived, except in the imagination of certain Scottish judges?

The Solicitor-General: I am obliged to the hon. and learned Gentleman for that information. I am sorry to prolong the life of the imaginary racehorse. It happens to provide a convenient instance of one of the difficulties I would ask my hon. friends to consider. There may be difficulties as to valuation in a case where a donor has reserved to himself a benefit at the time of making the gift, so that one might have to go back a long time in relation to valuation. There is yet another difficulty. One has to be aware of things which rather clever people may do in this context. If one thinks of the case of a very closely controlled company, the shares in which are held in very few hands, if a gift of shares were made it might not be impossible, under the system of valuation at the date of the gift, for a rather careful selection of dates to be made in relation to the market value of the shares.
We have, for those reasons, not thought fit to adopt the method suggested by my hon. Friend. I hope I have made plain to him what are the difficulties as against what is obviously a most attractive suggestion from the point of view of simplicity, but it is one which, after consideration, we felt it right not to adopt.

Mr. Frederick Mulley: There is very little which needs to be added to the very lucid reply of the right hon. and learned Solicitor-General. I would make the observation that it is open to any donor at any time to do what the hon. Member for Wycombe (Mr. John Hall) desires, namely, to express his gift in terms of cash. If he wishes, he can readily sell the shares, for instance, and then pay over the cash to the donee. Many of the difficulties can be avoided in that way.
We all know, of course, that the main purpose of many of these dispositions is not to give a straight cash payment or its equivalent, but to give property in a form which can rapidly increase in value by share manipulation or something of that kind. The right hon. and learned Gentleman has, I think, shown that the suggestion contained in the Amendment would give rise to even more abuses than the Estate Duty law is open to now.

Mr. John Hall: I thank my right hon. and learned Friend for his answer, but it does not entirely convince me. To take one of the arguments he put, I fully appreciate that the problem of depreciation has been a weakness—that an asset might depreciate in value during the five-year period—but donor and donee, knowing the value of the gift being made and received and knowing what would be their liability, would have to take that risk. If it was thought to be a very difficult point to overcome, perhaps one might introduce a Clause giving them an option to decide whether they would take the value at the date of the gift or the value at the date of the death.
The hon. Member for Sheffield, Park (Mr. Mulley) referred to the possibility of manipulation in shares, by which he meant, I take it, that it would be possible to make a gift of shares, in a controlled company, I presume—it would be difficult otherwise—

Mr. Mulley: What I had in mind was that the hon. Member's Amendment would have the effect of taking away the provision in the Clause to tax bonus shares and of reversing the judgment in the Attorney-General v. Oldham.

Mr. Hall: It does not do anything of the kind, because the shares would be valued at the date of the gift and account would be taken of the value of the assets of the company in which those shares were based. In any case, any manipulation of shares, which, generally speaking, could take place only in a controlled company by passing into that company assets by way of a gift, would be caught by the Finance Act, 1940. I do not, therefore, think that that is a very trenchant argument against the Amendment. However, in view of the objections which have been raised by my hon. and learned Friend the Solicitor-General, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 29, line 41, at the end, to insert:
A donee shall be treated for the purposes of this subsection as divesting himself voluntarily and without consideration, of any interest in property which merges or is extinguished in another interest held or acquired by him in the same property.

This Amendment is to deal with a form of disappearing trick which might become a convenient way of disposing of real property without risk of incurring Estate Duty on it. The Committee will recall the scheme of the Clause, that is, that where the donee has ceased to possess the property originally given to him, the charge will fall on the property which he has received in substitution for the property originally given. The Clause as it stands does not deal with what could be done with a leasehold interest.
It is easiest for me to quote two instances. Suppose that the donor gives the donee a leasehold interest and the donee then buys the reversion to the lease. The leasehold interest would disappear because it would merge in the reversion and there would be no substituted property on which any charge could be made. It may be—I should not like myself to attempt the argument—that that is already caught by subsection (3), but it does not seem desirable to leave the loophole.
The other instance would be the other way round. Suppose that the donor sells to the donee the reversion and keeps to himself a long lease—perhaps a very long lease leaving just one day in the reversion—and then gives the long lease to the donee. Once again, the long lease would merge and disappear and there would be no substitute property on which the charge could be made. The object, therefore, of adding these words is to deal with the matter by treating the donee in those circumstances as though he voluntarily divested himself of the leasehold interest or made a gift of it. That will bring what is required in justice into charge.

Amendment agreed to.

Sir Patrick Spens: I beg to move, in page 31, line 30, after "property", to insert:
which is by virtue of any of the foregoing provisions of this section to be treated as".

The Temporary Chairman: I think it would be convenient to discuss at the same time the right hon. and learned Member's second Amendment, in line 32, at the end, to insert:
except in so far as it directly or indirectly represents or is derived from property originally comprised in the gift in which the deceased never had an interest".

Sir P. Spens: I should like to deal with the second Amendment first. The other is supplementary to it. When I read subsection (10), I was staggered at its apparent generality. It is not attached in any way whatever to the Clause and it does not deal solely with the matters dealt with by the Clause. It is in absolute, general terms:
For purposes of aggregation, any property comprised in a gift inter vivos made by the deceased shall be deemed to be property in which the deceased had an interest.
For a long time there has been, I understand, a distinction between gifts of property which belonged to a man, in which he has had an interest and which he gives away, and gifts of property in which he never has had an interest and which he has provided in some way for somebody else. The most common of all is probably policies under the Married Women's Property Act for one's widow under which the husband has never had, and cannot have, an interest; and there are other examples, including gifts of property under a power of appointment in which the appointer has never had any sort of interest in the property.
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As subsection (10) is worded, it appears to me that there would be the gravest danger that those items of property which I cannot imagine were intended to be caught would, in fact, be caught. This would be a major reversal of the law up to date. If the Clause is not amended, that would be the result. In those circumstances, I propose the exception suggested in the Amendment, which would preserve the existing law and, I believe, the intention.

The Solicitor-General: It was necessary to have some provision about aggregation in the Clause, because the Clause will put the charge on varieties of property in which the deceased never had an interest—for instance, the substituted property that the donee gets in substitution for what he was originally given or the bonus shares issued. It was, as my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) has said, never the intention to gather into aggregation objects of property which would not have been the subject matter of aggregation apart from the operations of the Clause.
We were aware that the Clause went too wide in that it made aggregable any other property comprised in gifts which was not already aggregable and we were in the course of preparing an Amendment to put the matter right when my right hon. and learned Friend and others put their two Amendments on the Paper. They seem to us admirably to meet what is required and we should like to accept them.

Amendment agreed to.

Further Amendment made: In line 32, at end insert:
except in so far as it directly or indirectly represents or is derived from property originally comprised in the gift in which the deceased never had an interest".—[Sir P. Spens.]

The Solicitor-General: I beg to move, in page 33, line 2, at the end, to insert:
(15) Any reference in this section to property comprised in a gift being deemed to pass on a death shall be construed as referring to the conditions under which property so comprised is to be deemed to pass on the death being satisfied, apart from questions as to the identity or existence of the property at the death; and any reference to property being deemed to pass on a death by virtue of section forty-three of the Finance Act, 1940, shall be similarly construed.
What has happened here is tiresomely technical. In subsection (1), there is a reference to property which
is deemed for purposes of estate duty to pass on the death of the donor
and there is a parallel reference to deeming to pass on death in subsections (8) and (12).
Some ingenious person has raised a doubt whether property which no longer exists can in law be deemed to pass. I would have been prepared to argue that it obviously would pass under the Clause, but it does not seem wise to leave the matter in doubt. For that reason, it has been thought fit to add this new subsection, which puts the matter beyond doubt by making it clear that references to deeming to pass on a death shall be construed without reference to questions of identity or existence of the property but only with reference to satisfaction of the conditions, for example, the death of the donor within the five-year period, which make the gift chargeable.

Amendment agreed to.

Sir P. Spens: I beg to move, in page 33, line 3, to leave out from "shall" to the end of the Clause and to add:
apply only to gifts made and dispositions effected or determinations suffered after the ninth day of April, nineteen hundred and fifty-seven".

The Temporary Chairman: It would be convenient to discuss with this Amendment the right hon. and learned Gentleman's Amendment in line 3, leave out from "effect" to end of Clause and add:
in relation to any death occurring after the commencement of this Act, except that it shall not apply in relation to gifts made, and dispositions and determinations effected or suffered prior to the ninth day of April, nineteen hundred and fifty-seven
the Amendment in the name of the hon. Member for Basingstoke (Mr. Freeth), in line 6, at end add:
unless the donee ceased to have the possession and enjoyment of any of the property comprised in any such gift before the first day of July, nineteen hundred and fifty-seven".
and the Amendment in the name of the hon. Member for Wycombe (Mr. John Hall), in line 6, at end add:
Provided that subsection (4) of this section shall not extend to any share or debenture issued or any right granted before the thirtieth day of April, one thousand nine hundred and fifty-seven.

Sir P. Spens: It is with the agreement and permission of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) that I move the Amendment in his name, and the names of other of my hon. and right hon. Friends. This is a much wider and in some ways much more controversial subject than anything we have dealt with up to date.
Subsection (15) as worded at present provides that:
This section shall have effect only in the case of a death occurring after it comes into force; but on a death so occuring it shall apply in relation to gifts made, and dispositions or determinations effected or suffered, at any time.
These words are regarded as importing retrospective legislation affecting past gifts and dispositions.
It is quite true that the Clause comes into force only in respect of a death after the Bill has been passed, but that is the death of the donor, and what we have in mind, and what we are so deeply con-

cerned about, is the situation of the donees. We know that the object of the Clause is to deal with the mysterious racehorse, but on the other hand there is no doubt at all that donees may have received gifts during a period of five years prior to the death of the donor and may have perfectly properly, legitimately and honestly dealt with those gifts believing they were free to deal with them in any way whatsoever they thought fit.
The effect of the Clause is that on the death of the donor within the five years the property given or its equivalent is deemed still to exist and has to be aggregated with other property of the donor, and the unfortunate donee, as is so often forgotten, is the person who has to produce the Estate Duty. If the donee is a person who has been given a sum of money or the equivalent of a sum of money and has quite properly disposed of it that donee will not have the wherewithal to meet that charge for Estate Duty. Until this Bill was published that donee and thousands of donees throughout the country perfectly properly and honestly dealt with the gifts in the way they thought fit to deal with them. Therefore, if this Clause passes as it stands we impose—I am not going to say retrospectively—but we impose a very serious obligation on a number of people who may not have the wherewithal to meet Estate Duty at all.
It is true that to some extent—and the Committee will appreciate it—I have based my speech on the case where the donee has parted with the subject matter of the gift. There may be instances where the donee still retains the subject matter of the gift. I understand that in that event it is thought that it is not unfair that the donor and donee should remake their arrangements so as to take into account that now the gift has to be included in the donor's estate and that Estate Duty has to be produced in respect of it by someone. I do not believe that even that can be done without a great deal of unfairness to donors and donees, and in my view the right way is to carry out the exception in the way in which I have put it in the Amendment:
… that it shall not apply in relation to gifts made, and dispositions and determinations effected or suffered prior to the ninth day of April, nineteen hundred and fifty-seven.

The Chancellor of the Exchequer (Mr. Peter Thorneycroft): I think it may be convenient if I say what my approach to this matter is. The position, as I understand it, is as follows. Under the present law, Estate Duty is charged on gifts made within a period of five years before the donor's death at the value at the date of death and on the property as originally given, and on nothing else.
There are various anomalies in that law which the Clause seeks to put right. A debenture may be redeemed, or bonus shares which are not charged may have been issued and the value of the parent shares will correspondingly have fallen, or the security may be sold and the money reinvested less successfully, or alternatively the security may be sold and the money reinvested more successfully. That state of affairs has been used in part for deliberate but legal avoidance of tax, and in part it has had fortuitous and anomalous results for donees who have received gifts of this kind.
The proposal in the Clause is as follows. First, it applies a charge on the substituted property at the date of death where the donee has parted with the gift. Secondly, where he has parted with the gift for cash the charge is on the cash. Thirdly, an express charge is placed on the bonus share to deal with that side of the problem.
It is said that if we do this it may be retrospective. I cannot accept that it is retrospective in any ordinary sense of the term. It applies only to deaths occurring in the future, and every testator is, ex hypothesi, alive at the present time. I certainly cannot admit the tax principle which allows people to be protected against changes in the tax law after the making of their wills or settlements. I do not, however, want to argue about the precise meaning of the word "retrospective", as my right hon. and learned Friend did not either.
The criticism here is that the rules are being changed half way through the game and that a number of donees may be prejudiced. It is certainly true that this case differs from many cases of change in the tax law in as much as it affects property in the hands and under the control of the donee and he may have acted on the assumption of the law as it was. It is true that if the solicitor

was competent—and we presume all solicitors are—he may have warned him, and that if he was wise and prudent he may have acted in an appropriate way. But not all men are wise and prudent, and, perhaps, not all men get the same advice. Hardship could arise for anyone who thought in good faith that duty would not be charged and who had actually spent the money.
The Amendment suggests that we should exclude all gifts made before the Budget. I think that that goes too far. It includes, for example, the case where the event which would have removed the property or liability has not happened—the bonus shares have not been issued, the security has not been redeemed, or the shares have not been sold. In such circumstances, no one would be prejudiced since nothing would have happened and no action would have been taken.
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Nevertheless, I think that some easement is reasonable where the action has already been taken, especially as we are concerned here with much more than tax avoidance, because this is a Clause which amends the law on gifts inter vivos quite apart from that question of avoidance. The proposal that we have in mind and would propose to table on Report is that where before the publication of the Finance Bill—and I choose that date because that was the date on which everybody knew what was to happen—the donee has parted with the property or received the bonus shares, as the case may be, he should have the option to be treated under the old law or under the new. I cannot simply say that in such circumstances the old law would apply, because some people may have parted with shares and these shares may subsequently have risen and they would certainly prefer, and I see no reason why they should not, to be treated under the new law. It seems to me that an arrangement of that kind does justice in this particular case.
The arrangement ensures that anyone whose position could have been prejudiced, who had acted or was in a position to act under the old law as it was, has the opportunity of being dealt with under that law. I emphasise that I am not laying down a new tax principle but I am trying to deal with this problem on


its merits. Nor must I be taken as establishing a precedent to be followed in any future legislation against tax avoidance. I say this deliberately because the subject of avoidance of death duties is one to which I may have to turn on another occasion. The Clause, however, is more than a tax avoidance measure. It is a general provision which applies whether or not there has been avoidance, and I feel that in those circumstances it is right to err, if anything, on the side of generosity.

Mr. Eric Fletcher: The Chancellor has made a very important pronouncement. The Amendment has given rise to a good deal of controversy both in the Press and elsewhere. Speaking for myself, I think that we shall find, when we have had a chance of studying the text, that the Chancellor's statement, without going anything like the length desired by the right hon. and learned Member for Kensington, South (Sir P. Spens), has at any rate gone far enough to meet any cases in which there might possibly be a legitimate grievance.
When this matter was first raised in the Chancellor's Budget speech and was later elaborated on Second Reading of the Finance Bill, it was obvious that the Chancellor would find himself in a dilemma. I am glad that the right hon. and learned Member for Kensington, South did not attempt to press too far any argument based on the alleged evils of retrospective legislation. As the Chancellor knows perfectly well, there are a great many precedents for making provisions in the Finance Bill of a retrospective or quasi-retrospective order. It has now become recognised by both parties, on both sides of the Committee, and I think in the professions and by the public, that circumstances exist, have existed in the past and are likely to exist in the future in which the ingenuity of taxpayers is such that they will resort to astute devices which are so flagrantly of a nature calculated to avoid tax that public opinion will expect the Chancellor of the day to correct them as soon as possible.
Tax avoidance, after all, is no new thing in this country. It was going on long before the Norman Conquest, when it was customary to make gifts of land to pseudo-monasteries in order to avoid tax.

There is nothing particularly novel about it; but when it is particularly reprehensible it must be corrected by extreme measures. It is because of that that, when cases like the "disappearing trick" arise, it is the duty of the State to take steps to counteract them. As the Chancellor said, in a sense all legislation affecting Estate Duty must inherently have an element of retrospection about it, because Estate Duty only applies to the estate of persons who are going to die at a future date. Anyone who makes a will or a settlement does so knowing perfectly well that the rates of Estate Duty, its incidence, and the details of Estate Duty law may well change from year to year.
It is true to say that the possibility of defeating the five-year provision by selecting for gifts inter vivos stocks due for early redemption has developed in recent months to such an extent that most people were convinced that sooner or later, and probably sooner, the Chancellor would have to stop it. I think, therefore, that the real answer to objections to retrospective legislation of this kind is that people must not merely be taken to know the law as it stands but also must be taken to understand the possibilities of its being changed at an early date. [HON. MEMBERS: "No."] I do not think that I am saying anything very different from what the Chancellor said. He made a considered statement and I am making an impromptu reply.
I do not want to pursue that point because, in a sense, in view of the Chancellor's statement, a debate on the relative virtues or vices of retrospective legislation has become academic for the moment. I should like to study the Chancellor's statement and see the Amendment that he proposes to put on the Order Paper for the Report stage. I merely take this opportunity, as one who has expressed an opinion on this matter before, that it seems to me, speaking immediately after the Chancellor has made his statement, that the right hon. Gentleman has adopted a very sensible attitude. He has not accepted the Amendment of the right hon. and learned Member, but it seems to me that he has gone far enough to remove any case of real hardship which might arise in the case of trustees who, bona fide and legitimately, had parted with gifts given to them for a particular purpose, and in


circumstances in which it would be difficult for them to recover those gifts.
I would hope that we shall find the Chancellor's Amendment, while removing possible cases of hardship, will do nothing to endanger the principle that those who have resorted to this device on a large scale, and in circumstances in which the donee has not parted with the property and in which there has been no hardship, will not be able to benefit from the purely anomalous nature of the law as it has stood in the past.

Major W. Hicks Beach: I join in saying that this is a very important statement or concession made by the Chancellor. Those who have studied the law in this matter have found it difficult enough to understand when they have had it in print in books in front of them. I confess that I find it difficult to express an opinion on my right hon. Friend's statement without seeing on the Order Paper what exactly he proposes to do. Prima facie it seems a very sensible and reasonable concession. It will certainly save a great number of people from hardship. I have investigated this matter very closely and I had intended to give my right hon. Friend two or three examples in practice of where hardship would have arisen. In view of this concession, I need not worry the Committee with those details. I thank my right hon. Friend, and I shall study his statement with very great care.

Mr. Mitchison: The existing law in this matter is rather difficult and leads to distinctions which are not easy to understand. The last case reported turned on the following point. A sum of money was given and that was the only gift. It was given to trustees who were authorised to invest it in a particular company, which appeared to be a family company of some kind. They did so invest the money on the very day on which they received it. The gift was a gift of money and not a gift of shares, and was, therefore, treated differently from the way in which it would have been treated had it been a gift of shares.
Yet again, if we take the bonus shares, it is fairly clear that a result not altogether dissimilar to that of a bonus issue might be reached by splitting existing shares, but, as I understand the law at present, the effect would be a different one. At

any rate, it is generally thought to be different. Therefore, we are dealing with a state of affairs which, perhaps necessarily, is very complicated at present and, I am sure the right hon. Gentleman will agree, will not necessarily be simplified by his own Clause. That is no criticism of the Clause. Therefore, I agree very much with my hon. Friend that I, too, should like to see exactly what is proposed.
I may have misunderstood the right hon. Gentleman, but, if I understood him rightly, it comes to this. Supposing a gift of shares has been made or, if we are to deal with the imaginary racehorse, a racehorse in foal. The shares produce bonus shares after the date of this Finance Bill becoming law or the racehorse foals. In that case, the foal and the bonus shares will be treated under the existing law.
I am bound to say—and I say it with some hesitation because one wants to see exactly what is coming—that if, as the right hon. Gentleman told us, the disappearing trick was being practised on quite a large scale—and I think that the balance of evidence is that this was so—then what he proposes will enure for the benefit of a large number of highly undeserving cases; people who have handed over bonds with a date of maturity calculated a little time ahead of the date when this Bill becomes law. Of course, they will not have foreseen that, but it is likely that they may have handed over two or three-year bonds with every confidence, characteristic of the aged donor, that they will be able to manage for at least another two or three years in this world, and that by then, the bonds will have been redeemed.
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It may be said that that case is fanciful, but this is a provision designed for one or two purposes, and one is certainly to avoid the disappearing trick. It seems to me that the right hon. Gentleman will have to consider, and we too in due course will have to consider, the question of balance. I am not convinced that in the form the right hon. and learned Gentleman put it forward, though no doubt it would be right in some cases, the balance of right it would do would be greater than the balance of wrong it might encourage, and that is obviously a very difficult


thing for any of us to estimate. I might even say that the Inland Revenue may be in a better position.
My present impression, and I say it with great caution and some hesitation, is that we may be going too far, on the right hon. and learned Gentleman's suggestions, in the direction of protecting unfortunate donees at the expense of failing to deal with an abuse which appears to have been going on for some time, which was only too easy, and which really ought to be dealt with very firmly. Therefore, on this side of the Committee we shall wait to see what the Chancellor produces, and we hope that the Clause will be as tightly drawn as possible, having regard to the considerations I have put before the Committee.

Sir P. Spens: I want to thank my right hon. Friend the Chancellor for the forecast of the concession which he has given the Committee this afternoon. As far as I could follow it, the concession meets the case of those whom I have particularly in my own mind, and I believe that a great many perfectly innocent donees will be fully protected by the new Clause when we see it.
What the hon. and learned Member for Kettering (Mr. Mitchison) has said is that he is preserving his position so that, when the time comes, he can criticise the new Clause adversely if he thinks fit, but I cannot believe that the Committee will usefully use its time to debate the matter further until we see the new Clause on the Notice Paper. If that is the opinion of the Committee, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Houghton: We on these benches would have been prepared to support Clause 35 as it stands now in the Bill. It is a long Clause, of 15 subsections, designed to plug two notorious leaks in Estate Duty legislation in regard to gifts inter vivos and the determination of limited interests. The Clause also gives what would technically be called marginal relief to gifts inter vivos of slightly over £500, which would have been exempt from Estate Duty had they not exceeded

£500. That is the kind of tapering provision that is usually applied where a line is drawn between exemption and liability, and we are familiar with this difficulty in all taxation legislation.
The Chancellor has made a statement, the full significance of which will not be clear to us until we see exactly what he is proposing to do. There is no doubt, however, tha the following decision of the Attorney-General v. Oldham in 1940 on bonus shares, there has been a good deal of deliberate evasion. Clearly, if bonus shares issued with shares included in the property transferred are exempt from Estate Duty on the death of the donor, in the case of family businesses especially, this has been very susceptible of exploitation. The Solicitor-General, when dealing with an earlier Amendment, referred to the course of events which is within the control of a small number of proprietors of family businesses.
Whenever Estate Duty legislation is altered an argument begins as to whether it is retrospective legislation or not. The same argument has been raging through these proposals. Some say this is retrospective legislation and should be objected to in principle. Others say that it is not retrospective legislation because this same difficulty is encountered every time we amend the law of Estate Duty. After all, if we were to allow all arrangements already made by a testator to stand in the light of the existing law until the date of his death, the amendment of the law would not be fully effective in some cases for many years to come.
There is, we acknowledge, an important distinction in this case. Usually, a change in the law concerns only the testator, and it was within his power to take account of the change and to rearrange his affairs. In this case, certain property will have gone to another party. As the right hon. and learned Member for Kensington, South (Sir P. Spens) pointed out, some donees who have received the property may have done something with it believing that they would be exempted from tax on the bonus shares which the property brought them, and there may be difficulty in meeting the Estate Duty when the day comes. However, the testator is still alive, and in these cases he still has the power to make any adjustment necessary having regard to the change in the law.
I agree that in some cases he may have disposed of so much of his property in this way and given such bounty to a member of his family that he has virtually impoverished himself to ensure that when he dies death duties will make little havoc of his estate. The Committee will see the difficulties of checking abuses of this kind when they have to give freedom to existing arrangements to continue notwithstanding the desire of the Committee to bring that sort of thing to an end.
I see that in the course of much correspondence and comment in the legal journals on these proposals, some have suggested that testators must surely have been advised of the risks they were running in making arrangements of this kind. It may be disputed whether legal advisers are entitled to anticipate changes in the law. The truth of the matter is that nearly everyone knows what he is doing when he does this sort of thing. However, if he has not a twinge of conscience and if his mind is absolutely free from doubt or difficulty about the matter, one could sympathise with any difficulties which may result, but I do not think it can be denied that in the bulk of cases testators know precisely what they are doing and donees often know the risks that attach to their receiving substantial capital gains on the assumption that no Estate Duty will eventually be payable.
In a letter to The Times, of 23rd May, Mr. Milton Grundy, referring to the case of the "disappearing" racehorse, said that it was never a decision of the courts. Precisely. It was by analogy, and I understand that the Estate Duty Office took a decision to treat certain transactions by that analogy though the position was never really free from doubt and was not tested specifically in the courts. Surely there was enough legal doubt overhanging that sort of transaction to lead no one to act upon the certainty that short-term securities with an early date of redemption would be left for ever free of Estate Duty.

Mr. John Hall: I agree that there has always been some doubt as to the possible future of that kind of "disappearing trick" and that any solicitor or accountant advising his client must, I should have thought, have warned him about the possibility of a change in legislation. But that does not apply to bonus shares. Ever since 1940 it has been held that they do

not form part of the original gift. Therefore, anybody wishing to make arrangements of that kind did so in the belief that they were acting legally and making arrangements in accordance with the law at that time.

Mr. Houghton: I agree with the hon. Gentleman.
In his letter to The Times, Mr. Milton Grundy distinguished between the two. As regards bonus shares, he referred to the decision in the case of the Attorney-General v. Oldham of 1940, which established the case law in the matter. The proposal in Clause 35 in that respect is not to clarify the law or to remove anomalies, as may be supposed to be the case in relation to the "disappearing trick", but is intended to check abuse. That is clearly the intention.
Bonus shares have now become a customary way of distributing capital gains out of the resources of companies and they not only escape duty when bonus shares are issued after the gift of shares in the cases about which we are talking, but, of course, they escape Income Tax and Surtax as well. The bonus share, the capital gain, is the most profitable form of distribution of profits known in this country today.

Mr. Denzil Freeth: Will the hon. Gentleman agree that the distribution of bonus shares does not, in fact, add to the wealth of the person who receives them, and the very fact that we have to have this Clause to tax them is purely because if we do not tax them the value of the original holding decreases in strict proportion to the issue of bonus shares? It is an issue of paper.

Mr. Houghton: That is the classical argument that we always hear from the Tory benches on the question of bonus shares, but there are very few cases within my knowledge where the value of the asset is not greater in total after the issue of the bonus shares than it was previously.
I feel that hon. Members on both sides of the Committee must question what it is that the Clause seeks to do and how far we shall be justified in relaxing its conditions. However, I will not anticipate the Chancellor's proposals, which we shall have an opportunity to debate later. As we do not know precisely what


the Chancellor proposes, the Clause, as we have it before us, must remain part of the Bill, and we can support that and reserve our position on whatever concession the right hon. Gentleman may propose later on.
This is really a postscript to something that I was saying earlier about this wide and grave evil of tax avoidance. Right hon. and hon. Gentlemen opposite, in the main, represent the moneyed classes and the propertied people in Britain, and they will always do their best to defend their property. If they can find a way of doing it under the law, they will pursue it to the bitter end.
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If death duties are too high, the House of Commons ought to pronounce on that allegation. If the Legislature has said that they are not too high, then it is anti-social for those who are affected by the law to seek to lighten their individual burden by devices which they know full well to be an attempt to evade the full rigour of the taxation imposed by Parliament. If that is not a moral issue, I do not know what is. Certainly, we are here engaged in putting a check on the moral delinquency of right hon. and hon. Gentlemen opposite and their friends in the country. That is why we on these benches can support the Motion.

Mr. John Peyton: It is impossible to allow that last tirade to go without comment. I propose to make my comments extraordinarily brief and to show that the tirade was too ridiculous to merit a long answer. Both my right hon. Friend the Chancellor and my right hon. and learned Friend the Solicitor-General did a great deal to disarm the critics of this horrible looking Clause. The Solicitor-General very graciously and very wisely admitted that this was really a revolting Clause. It is a long and ugly thing. It is inserted in yet another rather prolix financial Measure.
Whatever our views and whatever measures of taxation we see fit to impose on an over-taxed nation, it is high time for us all to be anxious about the extreme complexity of our fiscal legislation. I dare say that it may be asking the Chancellor to do too much, that the Augean stables of our tax legislation have gone beyond cleansing, but, if he does not

admit defeat, I hope that the Chancellor will assume the mantle of Hercules before next year and try to do something about it.

Mr. Mulley: I sense a rather unseemly haste on the part of the Chancellor and hon. Gentlemen opposite to get rid of the subject of Estate Duty. I regret that, because it is very rarely that we on these benches have an opportunity of discussing this very important part of our fiscal system. That is because the nature of the rules of the House of Commons is such that a back bencher can put down Amendments to the Finance Bill only if he wishes to reduce the charge. Obviously, if one is concerned with some of the practices of avoiding Estate Duty, it is pointless to put down Amendments, because they would not be in order and could not be debated.
We have, therefore, to await occasions such as this when the Chancellor himself introduces an Amendment which raises this very difficult subject. The indignation of the hon. Member for Yeovil (Mr. Peyton) of the mild censure of my hon. Friend the Member for Sowerby (Mr. Houghton) indicated that my hon. Friend had scored a bull. There is no doubt that there is a fundamental difference between the two sides of the Committee in their approach to taxes on inheritance.
The party opposite, now putting out this idea of an "Opportunity State," very much wants to reduce the amount of death duties, but certainly does not wish to put other taxation in its place, as would necessarily be the case since we treat taxes on capital death duties as part of the annual revenue. It has always been a great surprise to me that the Chancellor's forecast each year of how many people will die in the ensuing year and what rate of taxes their estates will attract is singularly accurate, very much more accurate in many cases than some of the other forecasts on what one would have supposed to be less difficult calculations.
We should make it clear that we have been concerned for a long time about the increasing tendency to avoid the full impact of death duties. The Clause deals with two of the loopholes. We should have liked to raise these matters in preceding years, because it has been known for a long time that these things


have been happening and that there has been a great increase in the last four or five years. While I fully accept that it is open to every citizen so to arrange his tax affairs as to attract the lowest amount of tax, he cannot expect, having made what he regards as a tidy arrangement, that the law will stand still until the donor conveniently dies.
When we are talking of hard cases, the hardest case of all is that of a donor who makes a gift and who fails by a few hours to survive the five-year period. We all know that in these matters hard cases make bad law and I hope that the Chancellor will bear that very much in mind when he frames this new proposal about the date on which the Clause is to operate.
There are other matters to which the Chancellor should give attention. In this Clause we deal with Section 43 of the Finance Act, 1940, and in some respects the position of that Section will be more clear if the Clause becomes law. There is still a very substantial loophole arising from that Section, arising not as much from law as from the practice of the Estate Duty Office. If a life tenant sells his life interest to the reversioner the five-year period has to be overcome for there to be no tax involved. On the other hand, if the life tenant buys a reversion, then the Estate Duty ruling is that there is not a determination within the meaning of Section 43. It is held that the life interest is merged with the reversion and, even if the life tenant dies the following day, that part of his estate does not attract duty. Obviously, where a person has only one property, it is not easy to operate that manipulation, but someone with funds outside that settled estate can operate it and it is a very frequently used device.
The Chancellor should try to deal with all those loopholes, because, while perfectly legal, most of them arise from matters of practice rather than from matters of settled law. If one or two people take advantage of them, and thus pay less taxes, the general burden of taxation is to that extent increased.
On a future occasion the Chancellor should give considerable thought to discretionary trusts. There is a very great increase in the practice of settling money up to seventy or eighty years and it has

been suggested that even one hundred years can, by very careful drafting, be achieved, and the money goes on and on without the payment of duty. I do not want to go into detail tonight, but before we leave the Clause we ought to draw the very real distinction between the part of the Clause dealing with what is commonly called the disappearing trick and the part which is aimed mainly to deal with bonus shares and matters of that sort.
I hope that when it comes to dealing with retrospection the Chancellor will also draw a distinction, because no one will defend the "disappearing trick". As has been said, it has largely arisen out of an analogy drawn from the remarks of the learned judge in a Scottish case, what is known as the Strathcona case. There has never been a case concerning Estate Duty on a racehorse which broke its neck. It therefore arises purely upon Estate Duty practice.
Although the person concerned may feel it hard if the practice changes as a result of a Clause such as that which we are now debating, the practice of the Estate Duty Office can change by a judicial decision. We are surely not going to say that the courts should not reverse a previous decision because, if they do so, it will create hardship for people who have settled their affairs and made arrangements in accordance with the law as they understood it to be.
An example of this was the case of Sneddon v. The Lord Advocate. This was also a Scottish case. The Estate Duty Office must either be indebted to or embarrassed by this Scottish litigation. That case completely changed the practice of the Estate Duty Office in its calculation of duty in this class of case. Whatever we may do here it is quite possible for the courts, in interpreting the various Acts of Parliament, to change what we now regard as settled law.
As for the "disappearing trick", I do not think that any legal adviser of any standing would say, "We are absolutely all right. There cannot be any possible question as the law now stands of your getting into difficulty if you buy Treasury shares and they expire before the donor dies." I do not think that anyone would advise that with certainty.
On the other hand, as my hon. Friend the Member for Sowerby (Mr. Houghton)


argued—and he quoted a letter from The Times to the same effect—there was some distinction in regard to bonus shares because since 1940 we had the decision in the Oldham case: For that reason it may be possible to draw a distinction between the two parts of the Clause, and no doubt when the Chancellor is considering the form of his change he will bear that in mind.
We have heard much about the hardship that will arise from the taxation of bonus shares as proposed by the Clause. I am always suspicious when people say that something will upset other people who have arranged their affairs. The phrase "arranged their affairs" rather suggests that they have been carefully arranged with a view to tax avoidance. It is always possible for a donor who feels that the shares he wants to give may go up or down to make a present of cash.
Surely there is a great injustice in the respective methods of dealing with a gift of shares as distinct from a gift of real property, such as a house. In the latter case the person who has received the house has to pay duty on any capital gain that the property undergoes in the period between the gift and the death of the donor, but in the case of the inflation of his share values the recipient of the shares does not have a similar increase to pay.
It is all very well to say that when shares are valued at the date of the gift that value takes full account of the reserves of the company. It may be so sometimes, in the case of private companies, although I rather doubt it, but it is certainly never true in the case of public companies quoted on the Stock Exchange. If a bonus issue is made of one for one it is rare for the new market price to be half what it was before the bonus issue was made. If it is, it rarely stays there for long.
I was looking today at the figures in the Tate and Lyle shares which were the subject of the case of the Attorney-General v. Oldham, upon which the present law about bonus shares is founded. In that case there was a slight drop after the bonus issue was made, but it was more than made up eighteen months after the gift.
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I feel that a great deal of exaggeration is found in the arguments of people who object to the very reasonable proposals which the Government are now making. Behind their particular objection is the general objection to taxes on wealth and inheritance. I hope that the Chancellor will repeat the very severe warning that he gave in his earlier observations; indeed, I hope that his warning will be even more severe, not only to the Committee but outside the House, because Conservative Chancellors, although always giving these warnings, seem to give way if they receive a little back bench pressure. If the people who are avoiding this or any other tax want a clear indication of what should happen to those who avoid tax I would refer them to the speech of Mr. Neville Chamberlain in 1937, when he was Chancellor of the Exchequer. It is worth reading a brief quotation from that speech because it deals completely with this point. Mr. Chamberlain said:
My second proposal is intended to strengthen certain provisions with regard to tax avoidance in the last Finance Act. It may be recollected that on the Report stage of the Bill, when I made a concession about a provision which as retrospective in character, I gave what I described at the time as a fair warning that similar latitude should not be expected in the future and that, if people persisted in devising these ingenious contrivances for defeating the intentions of the Legislature, they must not expect that they would escape retrospective legislation."—[OFFICIAL REPORT, 20th April. 1937; Vol. 322, c. 1610.]
That is exactly what the Chancellor has done again today. But I have no doubt that both now and on future occasions, when the Governments attempt to take action to deal with the avoidance of taxes, a little pressure from the benches behind them will prevent them making their action effective at once. We reserve our views about the Chancellor's new proposals until we see them. I hope that they will be narrow rather than wide in their scope and that we shall not have too much reason to criticise them.

Mr. Denzil Freeth: I will not keep the Committee for more than a few moments. I think that the point of the morality of the retrospective action which Mr. Neville Chamberlain took in 1937 should be dealt with completely, once and for all. I rise now only because the hon.


Member for Sheffield, Park (Mr. Mulley) quoted substantially from Mr. Chamberlain's Budget speech of 1937. If we continue further with the quotation which the hon. Member made we shall find that after the last sentence which he quoted, namely:
if people persisted in devising these ingenious contrivances for defeating the intentions of the Legislature, they must not expect that they would escape retrospective legislation.
he went on to say:
In some quarters that warning was disregarded, and no sooner was the Finance Act upon the Statute Book than some highly artificial arrangements for circumventing its provisions were adopted in connection with particular kinds of one-man companies known as investment companies. I propose to take power to defeat that evasion. In order to enforce my warning of last year, I propose to make the remedies effective for purposes of Sur-tax for the year 1935–1936."—[OFFICIAL REPORT, 20th April, 1937; Vol. 322, c. 1610–1611.]
When the Committee stage of the 1937 Finance Bill was debated Sir John Simon had become Chancellor, and it was he who replied to the debate on the question whether or not this action was retrospective in its effect. On 9th June, 1937, Sir John Simon quoted from a speech made by Mr. Neville Chamberlain on 1st July, 1936. On that occasion what Mr. Chamberlain said—a year before his retrospective legislation—was:
I would wish to make it quite clear that I do not consider that, in the future, people will be entitled, if they find new methods of avoiding taxation of a similar character to those which are dealt with in this Bill,"—
that is, the 1936 Finance Bill—
to say that they are protected by anything I do now from retrospective legislation. I give them fair warning, and after that fair warning I think that they will have no reason to complain if retrospective legislation should be found necessary in this particular class of case."—[OFFICIAL REPORT, 1st July, 1936; Vol. 314, c. 442–3.]
That was what Mr. Chamberlain said in 1936, and during the Committee stage of the 1937 Finance Bill Sir John Simon went out of his way to say:
I would point out that this is a very special case … Ample notice was given by the Chancellor."—[OFFICIAL REPORT, 9th June, 1937; Vol. 324, c. 1916.]
In other words, there is no parallel whatever between any action which my right hon. Friend may take in this Finance Bill and the action taken in the 1937 Finance Act. The parallel does not exist. My right hon. Friend may be right or wrong, but there is no parallel.

Mr. Mulley: I was not suggesting that the two things should be comparable. I was merely saying that I did not think that in future notice need be given before taxation avoidance was dealt with. I hope that the very similar words used by the Chancellor today—that was what made me press the quotation upon the Committee—will not also be treated in the future as were Mr. Chamberlain's words.

Mr. Denzil Freeth: One always hopes that people will obey the law, but I believe that there is nothing whatever wrong in so arranging—I use the word to which the hon. Member referred—one's affairs that one attracts thereby the minimum of tax.
I was talking to an American friend the other day and I asked him how he got on with the Federal Treasury about the question of Income Tax. He said that the Federal Treasury officials were most helpful: they always pointed out to him how he could pay the least possible tax upon his income. He asked whether the British Treasury was as helpful and generously-minded as his own. Of course, it is painfully obvious that the British Treasury is not.
When people arrange their affairs so as to attract the least possible Income Tax or death duties, or whatever tax it may be, I think it quite wrong that, when those dispositions have been made, the Government should proceed to take legislative action against such provisions, made in strict accordance with the existing law.
I think I am right in saying that in the 1947 Finance Act the right hon. Member for Bishop Auckland (Mr. Dalton)—who increased from three to five years the length of time during which a gift inter vivos had to be made before the death of the donor—went out of his way—I hope I am not putting the right hon. Gentleman in an awkward position with his party by saying this—to make certain that gifts made before 10th April, 1943, did not come under the new law. In other words, the right hon. Gentleman went out of his way to make arrangements about gifts which had been made with the idea that they would totally cease to be part of the estate of the donor three years before the date on which the right hon. Gentleman opened his Budget. That is to say, three years was the time


which, in 1943, a person needed in order completely to get rid of any of his property. In his Budget, the right hon. Gentleman did not attempt to bring those people into the new length of time.

Mr. Hugh Dalton: My recollection is—I have not checked it, because I did not know that this point would be raised—that I did not regard this provision as laying down any principle regarding retrospection in general. As it seemed to me, it was simply a fair and just way of determining when the new period of five years, as compared with the old period of three, should begin to operate. I am grateful to the hon. Gentleman if he thinks that my decision was right, but I do not think that it bears directly on the general question which we are discussing.

Mr. Denzil Freeth: I think it bears on this Clause in this way. The point is; which is the right and just point of time from which a new provision should be made to operate.
I happen to believe that the point of time in the Clause as it is at present drafted, namely the death of the donor, is a thoroughly unjust point of time to take. It perpetuates the difference between the gift which has been made, and which has disappeared by a person who happens to die in the time between now and, I suppose, the end of July when this Bill will become an Act, and the gift made, which has disappeared, by a donor who happens to die, let us say, on August Bank Holiday when the Finance Bill has probably received the Royal Assent.
Similarly, it appears to me that there are distinct disadvantages in taking the date of the gift, because if we take that date and say that any gift which is made after, for example, 1st April comes under the new Bill, and any gift made before that comes under the existing law, we are issuing an open invitation to everyone who made a gift before 1st April immediately to take all possible steps to ensure that that gift disappears. In fact we should be encouraging people to do exactly what the Clause is designed to stop.
I believe that the suggestion of my right hon. Friend, couched in the general terms in which he put it, and without

committing myself fully to its approval, is fixing the right and just point of time just as the right hon. Member for Bishop Auckland fixed it so happily in 1946.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 36 ordered to stand part of the Bill.

Clause 37.—(PROFITS TAX (INTEREST PAYMENTS OF CERTAIN ELECTRICITY BOARDS).)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. John Rankin: I wish to put a point to the right hon. Gentleman which deals with the South of Scotland Electricity Board. The Committee will recollect that, as a result of the amalgamation of the South Eastern and the South Western Electricity Boards, we had the formation of the South of Scotland Electricity Board in 1955. We discussed it in 1954 and it took effect in 1955.
It will be within the recollection of most hon. Members that the 1947 Electricity Act, as is indicated in the Finance Bill, laid down in Section 40 (3) that the nationalised industries, so far as concerned Profits Tax, should not operate under more favourable conditions than private industry. I take it that both the South Western and the South Eastern Electricity Boards operated under the conditions in that Clause in the 1947 Electricity Act.
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Why is it that it is only now that the South of Scotland Electricity Board is coming under that part of the Bill? Why did not this Clause, as seems to me it ought to have done, appear in last year's Finance Bill? That would appear to lead one to the belief that during the period since its inception the South of Scotland Electricity Board has been outwith the operation of the 1947 Act. The point that occurred to me when I saw this Clause in the Bill this year was: why was it not in the Bill last year?
It may be—and I think that this is correct—that there were no profits to show in its operation and, because of that, the Chancellor of the Exchequer a year ago said, "What is the use of bringing the


Board within the operation of the Electricity Act if there are no profits with which to deal?" This seems to me rather a weak excuse. It is possible that the Treasury had forgotten altogether about the South of Scotland Electricity Board. Now that its existence has been discovered it has been decided to bring the Board into the Finance Bill. Perhaps the Chancellor or the Financial Secretary will enlighten us on the matter.

Mr. Powell: The hon. Gentleman the Member for Govan (Mr. Rankin) has quite correctly explained the general effect of the Clause. I can assure him that there is no gap left by the Clause after the period when the South of Scotland Electricity Board came into effect, because I am advised—perhaps this is retrospective in another context—that it will have effect from the time of the South of Scotland Electricity Board coming into existence.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 38.—(REDUCTION OF NATIONAL LAND FUND.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East): An hon. Member opposite referred to an earlier Clause as a long and ugly Clause. I hope that hon. Members on both sides of the Committee will regard this as a very short but very ugly Clause and will ask the Chancellor to withdraw it and look at it again.
I think it would be fair to say that I could speak on behalf of many hon. Members on both sides of the Committee in making that appeal to the Chancellor. I certainly feel that I could speak on behalf of very many voluntary organisations in the country on behalf of their members. I am sure that the Chancellor must be aware of the feeling that exists, as I understand that he has had a good deal of correspondence in relation to this Clause. I regret that the replies he has sent have so far been not very encouraging to those of us who wish to see the National Land Fund retained for the purposes for which it appears to us it was originally created.
is certain is that there are very many members of voluntary organisations

who regard this Clause as being—one might almost say, in effect, that it means the abolition to all intents and purposes of this Fund—as a blow to all their hopes and expectations, and as a very cruel recompense for all the voluntary work which they have, in fact, been doing and for which they have been complimented by successive Ministers of all political persuasions. Perhaps I may say in parenthesis that it has not been possible for a Liberal Minister to congratulate them, but I am sure that had there been a Liberal Minister he would have congratulated them in equally fervent terms.
Bodies like the Ramblers' Association, of which I have the honour at the moment to be President, and the Youth Hostels' Association corresponded with the right hon. Gentleman the Chancellor, and there are very many other amenity bodies in the country who had pinned their hopes in effect to the possible future use of the National Land Fund for the development of national parks, and, indeed, for other amenity projects as well. Therefore, it was a disaster to them and it came as a very great shock when the Chancellor appeared to slip into his Budget speech very casually, without any preparation at all, the proposal for the abolition of the Fund. We now have this in Statutory form in this Clause. Why hon. Members on both sides of the Committee—

Viscount Hinchingbrooke: The hon. Gentleman said that it was being abolished. It is being reduced to £10 million.

Mr. Blenkinsop: The hon. Member anticipated me. I was saying that to all intents and purposes it was abolished for the purposes for which hon. Members here, and certainly members of the voluntary bodies, expected this Fund to be used. That is the point to which I am proceeding.
Hon. Members may well ask why voluntary bodies feel so deeply about this matter. Surely if one wants to explain that one needs to look at the origin of the Fund. It was very noticeable that the Chancellor, in making his proposal for its abolition in the Budget, made no reference at all to the wider purposes for which the Fund was envisaged when it was established by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton).
It must be remembered that when my right hon. Friend made his proposal in his Budget speech, in 1946 I think it was, he made it clear that he was willing that this Fund should be made available in the future for the development of national parks, which, of course, at that time were not in existence, and for other purposes. He referred to the possibility of public acquisition of certain land which has an especial amenity value, and other proposals of that kind. Indeed, when the Finance Bill of 1946 was introduced, it specifically referred to "such purposes as Parliament may hereafter determine," in addition to the precise proposals which at that time it was possible for my right hon. Friend to make. Therefore, it clearly was always understood at that time that there were other uses to which the Fund might well be put.
It is perfectly true that when the 1949 National Parks Bill was introduced and discussed and finally became an Act the opportunity was not taken, as it might well have been, to make use of the Fund. Again it may be said that that was the opportunity. It is a perfectly fair point to make. It is equally fair to point out that by that time there was very strong opposition by local authorities, which had only recently become major planning authorities under the 1947 Act, to any proposal to erect a new planning body that had separate financial authority. Whether it was right or not that pressure should have been needed in that way is another matter. There were certainly differences of opinion expressed at that time about it. What is certain is that, whereas at that time local authorities were very suspicious—shall I put it that way—of the possibilities of a separate planning authority with financial powers that they might receive from the National Land Fund, that is not the position today.
The striking thing is that the County Councils' Association, which is the local authority body most concerned in this matter, has expressed itself clearly in a letter it sent to the Minister of Housing and Local Government on 22nd February of this year. In that letter it specifically states its view that—
a part of the monies accumulated in the National Land Fund could be drawn upon or earmarked for the purposes of the Parks and

that the use of the Fund for the implementation of national parks policy would be consistent with the purposes for which it was originally established.
That makes it clear that the County Councils' Association no longer takes the view it took in 1949. Therefore, it should now be possible, without opposition from that association, to make reasonable provision for the use of this National Land Fund for what, I believe, most hon. Members would agree is the highly desirable purpose of encouraging the development of national parks and their proper use.
My second point is that the Public Accounts Committee made a recommendation on this matter, as it was entitled to do. That Committee does not pretend to discuss matters of policy with which the Committees of the House of Commons are concerned. It was considering the proper use of the Fund for the purposes which the House of Commons had approved. It made the no doubt very proper comment, although some of us objected to it at the time, that if the Fund was not to be used—or part of it—it had better be returned to the Exchequer.
We should note the fact that the Committee was not taking a view whether or not other uses should be made of the Fund; indeed, it would be improper for it to do so. That is entirely a matter for the House of Commons to decide. To rely upon the Public Accounts Committee's recommendation without referring to the earlier proposals of my right hon. Friend seems therefore to be rather extraordinary.
Local authorities have found it very difficult to make financial contributions of any realistic character towards the development of national parks. The Exchequer makes a grant of about 75 per cent. to approved national park expenditure; local authorities are expected to find the remaining 25 per cent. This does not cover all national park expenditure but only certain approved expenditure. Local authorities, perhaps naturally, are not particularly eager to find even the 25 per cent. contribution for projects which they regard as mainly of a national character and only to a limited extent of local interest. They think the matter should be dealt with mainly if not entirely from national funds.
One can understand that point of view. Therefore it is difficult to get projects put forward which most of us would agree are needed and are not a matter of party-political controversy. These include measures to clear up some of the most beautiful areas and make them more enjoyable and to encourage the development of a warden service, which I understand is urgently needed in many areas even to protect the use of the areas for agricultural purposes as well as to ensure that wider public use does not interfere and detract from their beauty. Even if the warden service were recruited largely on a voluntary basis, as it probably would be, it would need funds. At the moment most park authorities are not willing to make much contribution towards it.
7.15 p. m.
Administrative expenses are not among those for which the Exchequer makes a contribution, but have to be found by local authorities concerned with the park areas. That situation has in many cases led to the refusal of the local authorities to have separate or special officers for the work of planning and developing national parks. The Peak Area is among those for which officers have been appointed and all credit is due to the local authorities for having done so. There is common agreement that the existing administrative situation has led to a very great reduction in the value of the work done in park areas like the Lake District and elsewhere. There is very real need for more finance for these park areas, in view of the very large sums which are necessarily asked for for national parks. The areas concerned are usually in counties which, by their very nature, are poor and have not much rateable value, like Merioneth and Westmorland. These are not areas with very large funds.

Mr. W. M. F. Vane: But they do know the difference between the words "abolition" and "reduction."

Mr. Blenkinsop: Those authorities are constituent bodies of the association which said that the National Land Fund ought to be made available for the wider purposes of national parks. They would undoubtedly agree that if the Chancellor's proposal to reduce the Fund to £10 million were accepted it would be impossible to make any step forward in using

the Fund for national parks and would inevitably mean restriction merely to the existing use of the Fund to compensating the Exchequer for certain properties taken in exchange for and in settlement of Estate Duty. There may even be doubt whether the Fund would be sufficient for that purpose, in view of the fact that certain properties are coming along in which the Exchequer might be interested.
If the proposal now in the Finance Bill were accepted, there would be no hope of money becoming available for national parks or for any additional purpose that we might otherwise desire. I have explained that local authorities naturally see difficulty at the moment in making contributions and that the sums they are contributing are pitiably small. Contributions from the Exchequer are also pitiably small and amount to about £11,000 a year in grants to local authorities for national park purposes. As hon. Members will appreciate, that is a very small sum. It is no use either the Chancellor or the Financial Secretary, when replying to the debate, saying that proposals are not put forward, because I have explained that the set-up at the moment, while it does not prohibit local authorities from putting forward schemes, at any rate deters them.
Unhappily, the proposals which we understand that the Government will put forward for the future financing of local authorities will deter them still more. That is a further reason why the question needs to be looked at again now and why the situation has changed from the past. We understand from statements made by the Minister of Housing and Local Government that in future the specific grants to local authorities are to be swept away and are to be replaced by a general grant. If this work is to be merged in the general provisions for local authorities, then it is almost inevitable that National Parks will get an even smaller contribution from that general fund than they have received in the past. That is a very serious prospect and it is why we are particularly concerned about the Chancellor's proposals at the moment. We think that, coming at a moment when these changes are proposed in local government finance, they can result only in the disappearance of all contributions for this purpose.
I have mentioned one or two of the needs, and I think there is no controversy about them in the Committee. In the past, they have been raised from both sides of the Committee, and I am sure that they will be raised on both sides again. One of the needs is for electric transmission lines to run underground in areas of special beauty. That is the sort of work which we believe is properly a national charge and which ought to be carried out. [Laughter.] I do not know why the Chancellor regards it as especially funny. He may like to see the new cohorts of transmission lines and pylons passing over the countryside, but many people do not.
While we are reasonable about this and do not suggest that in every case the line should be put underground, because we understand that extra cost is involved, we say that in areas of exceptional beauty, such as in the national parks, the lines should be put underground. I thought there was agreement about this. We also say that the cost should not be borne by the local consumers of electricity, who have every right to electricity at a reasonable charge, but should be borne nationally. After all, we all enjoy the beauty of these areas. I thought this was a matter of some concern to all of us.
I have mentioned the need for warden services; there has been plenty of comment about this need. If the right hon. Gentleman and his hon. Friends regard all this merely as a matter of general humour, I am surprised at them, because I thought that it was a matter about which everyone could express their concern and in which they could express their interest without it being dismissed as in any way flippant or unimportant. I thought it was agreed that this was a matter of some concern.
We surely all agree on the need for extra accommodation in some of these areas, and that, again, may involve some cost. There is also a need to clear unsightly buildings, relics of the past, which badly need to be cleared away. That, again, involves expenditure and in some cases compensation. There is certainly a need for the provision of more education about what the parks can provide in the way of opportunities for enjoyment by young people and about how those opportunities should be properly used. There

is a need for a great deal of education in our schools and there is a great need for printed material of all kinds. It all costs money, and, as a consequence, the National Parks Commission finds it impossible or very difficult at the moment to carry out this work. In every one of its Reports, from its inception, the Commission has made clear the difficulties which it has had to face and which it needs to overcome.
I do not suggest for a moment that the National Parks Commission is the only body which should benefit from this Fund. That has never been suggested. Other perfectly proper and valuable suggestions could be made, and some have been made in the House from time to time. There have been suggestions in line with the use of a similar fund in Northern Ireland, where it is used for acquiring for public purposes land which has a high amenity value. There have also been suggestions in relation to some of the Nature Reserve areas. Indeed, many different and very proper proposals have been made of ways in which this money should be used.
I thought that the Chairman of the Youth Hostels Association made a sensible suggestion in his letter to the Chancellor when he said that the Chancellor might well appoint a Committee to advise him on how the Fund should be used for the future of our countryside and the young people of the future. He started that sentence by saying that in his view it would redound greatly to the Chancellor's credit and the credit of the Government if they were to cut some of the Gordian knots which have tied up this money in the past.
That is a very reasonable plea to the Chancellor, phrased, I think, tactfully and politely. I very much hope that the Chancellor will not insist upon pressing his proposal as it stands but will be prepared to listen to views which I hope will be expressed from both sides of the Committee on this subject. I hope, too, that he will understand the very sincere feelings which are held by very many people whom I thought he wished to help.
The whole movement for national parks, the desire to preserve the beauty of the countryside and the campaign for access to some of our wilder and most beautiful country, has been conducted very largely upon a voluntary basis, and members of all these voluntary bodies have been


delighted to have the opportunity to give their voluntary services. Such bodies as the Ramblers' Association and others have done a great deal of voluntary work for the objects which I thought were common to us all. They have done their best to help in dealing with retaining footpaths and in the preservation of the countryside, and they have done much work in preparing the plans for developing our long-distance footpaths. Already they have done a great deal of voluntary warden service. All that they are asking for is some encouragement in that work.
They feel, I think rightly, that if the Chancellor is to proceed with this proposal and to do away with any hope of financial support for them in the work which they have been doing so nobly, it will be a serious blow to them. I can fairly say on their behalf that if the Chancellor finds it possible to make some of this Fund available for this undoubtedly vital work of preserving the countryside, they on their part will certainly be willing to increase the amount and to campaign to increase the amount of their own voluntary contribution.
I therefore hope that after the right hon. Gentleman has heard what I am sure will be said by many of my hon. and right hon. Friends, and I hope by many hon. Members opposite, he will indicate that he will think over this matter again and will be prepared to consider further proposals later. We do not wish to regard this in any way as a party political matter and a matter of party controversy. We hope that it is one which will be agreed by hon. Members on both sides of the Committee.

7.30 p. m.

Mr. Powell: It is useful that the hon. Gentleman the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) should have initiated a debate upon this Clause, because it affords an opportunity for removing a number of misapprehensions—and mistaken apprehensions—which have surrounded my right hon. Friend's proposal.
To have an understanding of what the Clause does, it is necessary to realise what happened in 1946, when the National Land Fund was set up, and, more particularly, what did not happen. What happened when the National Land

Fund was set up was that the Exchequer lent itself £50 million. That was the reality of what the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) described as his "prudent budgeting years ago." In 1946, a year in which the National Debt was increased by about £600 million, the Exchequer created a paper Fund by lending itself £50 million. The Fund in itself, until it comes to be used for any particular purpose is non-existent. It is not merely inert; it is absolutely non-existent.

Mr. Dalton: I am sure that the Financial Secretary has been long enough at the Treasury to know that this money is actually invested in forms of short-term debt on which, once a year, no doubt with his signature below, the House is fully informed. How then, with that regard for precision of language which one of his great academic distinction must always attain, can the hon. Gentleman describe it as "non-existent"?

Mr. Powell: What I said is quite right. The Government have lent it to themselves; they have created a paper debt. The only practical effect of this paper debt is that, year by year, as long as it has existed, the Exchequer has paid itself interest upon it and has credited that interest to the Fund, so that the nominal value of the Fund has risen from £50 million to about £60 million.
That has had a slight effect, because it has meant that a sum of about £1 million has annually been raised in taxation as required for the service of the National Debt and been devoted to the extinction of that amount of debt, while a corresponding addition has been made to the paper amount of the Fund. Thus, the only practical effect, so far, of the Fund existing has been that about £1 million annually has been raised above, and applied below, the line which otherwise would not have been.
However, when the Fund is brought into use, either to reimburse the Inland Revenue for Estate Duty forgone in respect of land or chattels, or else to reimbuse the Minister of Works for expenditure incurred by him in the purchase of historic houses, and the like, then, of course, real money is required. That is obtained by borrowing, by the sale of securities, that is, by borrowing from the public.
The reality of this arrangement is, therefore, that these forms of expenditure on the purchase of these assets for the nation—that is what it comes to, in effect—are financed not out of the revenue of the year, but by borrowing. That is the only reality behind the National Land Fund. It is a means of meeting this type of expenditure by borrowing in the year in which it is incurred instead of by taxation in the year in which it is incurred.
There is a very good case for doing it in that way. These are not forms of expenditure which, year by year, can readily be brought into Estimate form. After all, it is very difficult to be sure, in a particular year, whether an important estate or a very desirable historic mansion will fall in to be acquired. Consequently, the fluctuations in this type of expenditure from one year to another may be so large as to render the ordinary Estimate procedure not conveniently applicable. It probably is a good thing that we should meet this type of expenditure by borrowing rather than out of revenue.
Parliament, very naturally, desires to keep control not only of expenditure which is met out of revenue, but of expenditure met by borrowing. If a Fund, a device of this sort for meeting expenditure by borrowing, is linked to too large a figure, then the effect is that Parliament loses control of the expenditure. It means that it has no opportunity, not only from one year to another but from one generation to another, of debating the expenditure, the wisdom of it, whether it ought to be made, or its amount.

Mr. Leslie Hale: The Financial Secretary has just said that the financing of the Fund was produced from current revenue year by year. The payments of interest on the investments is charged in each succeeding annual Budget. It is, therefore, clear that it is subject to discussion every year.

Mr. Powell: It is the amount of the interest which is provided out of revenue.

Mr. Hale: That is the relevant item for debate.

Mr. Powell: Far from it. It is expenditure met by borrowing—in the terms

that we use, "out of the Fund"—which is the reality of the expenditure which is covered. It is for that reason that the Public Accounts Committee, in its Report for the year 1953–54, recommended that the limit to which this type of expenditure might be met by borrowing without further recourse to Parliament should be reduced. That is the essence of the Committee's recommendation, and that is the essence of what my right hon. Friend is doing here.
I should have thought that it is no part of an Opposition's duty to argue for an extension of the limits on what the Government ought to be able to do without Parliamentary control and without recourse to the House of Commons. I should have thought that an Opposition ought to insist that there ought to be a fairly low limit upon the amount of expenditure which could be met by borrowing without further recourse to the House. At any rate, if hon. Gentlemen opposite were not ready to perform that function, my right hon. Friend has done it for them by inserting this Clause into the Finance Bill.

Mr. Hale: I hope that the hon. Gentleman will forgive me for interrupting again; I am trying to follow his argument, and I am anxious to have it clear.
I understood that his earlier complaint was that the Fund was not met by borrowing; it was met by a process which we used to call earmarking. In other words, the Treasury allocates a figure and makes it available in its accounts without going to the trouble of borrowing the money in the City of London. Every other fund has been subject to borrowing. Now, having complained that it was not borrowed, he is complaining that it is, and saying that we ought not to go on borrowing it because we cannot discuss the amount we borrow.

Mr. Powell: What happens is that the money required for the purposes for which the Fund may be used is borrowed as and when it is required, and the limit up to which such sums can be borrowed and applied is at present £60 million, and is being reduced to £10 million so that further Parliamentary authority will be required when that lower limit is reached. That is the effect of what is being done.
This change, which is merely a restoration of Parliamentary control which ought


never to have been lost, will not in any way prejudice or affect policy in regard either to the matters upon which expenditure provided for under the Fund can at present be applied, or in regard to matters to which Parliament may decide to apply it in the future. There is no prejudice in what is being done here to any proposals which the Opposition care to make for changing their mind about the financing of the national parks by arguing that they ought to be financed by borrowing rather than out of revenue.
There is nothing here which inhibits that. There is nothing here which in any way limits or affects policy as to the acquisition of historic houses or the acceptance of land or chattels in lieu of Estate Duty. All that is being done here is to impose a much closer limit upon what the Government can do by way of borrowing without resort to the proper source, the authority of the House of Commons. That being the sole effect of the Clause, I should have thought that it would have commended itself to hon. Members on both sides of the Committee.

Mr. A. Woodburn: Obviously, the theory is that if the Government have to budget specially for the money and it is not part of this allotted sum, it will be more difficult in future to get money for these projects. The Financial Secretary has said that the policy will not be changed, but the point has been raised that the whole principle of the block grant to local authorities is to be changed. Will it be more difficult in future, or just as easy or as difficult as it is now, for these objects to be financed if the Fund disappears or is reduced to £10 million?

Mr. Powell: Not by reason of what is here being done.

Mr. George Benson: I listened to the long and eloquent speech of my hon. Friend the Member for Newcastle - upon - Tyne, East (Mr. Blenkinsop), but I found it extraordinarily difficult to relate anything he said to the Clause. One thing for which the National Land Fund cannot be used is the establishment and development of national parks. My hon. Friend talked about nothing else.
We are discussing a very narrow point and the Financial Secretary put the whole

matter extremely clearly. For some curious reason, the Land Fund put £50 million, which has now grown to £59 million, out of the control of the House of Commons. I see no reason why any Fund of this size should be outside the control of the House and in the control of the Chancellor of the Exchequer with which to do what he will within the ambit of the law. It was thoroughly bad finance.
It was because it was a thoroughly bad financial principle that in 1953–54 the Public Accounts Committee recommended that the National Land Fund should be reduced. It did not say to what extent, but it said that it should be reduced. These were that Committee's words:
Your Committee think it undesirable in principle that substantial amounts of public money for which there is no foreseeable need should be kept in special funds or accounts outside the direct control of Parliament.
At the meeting at which the Public Accounts Committee decided upon that recommendation, my hon. Friend the Member for Newcastle-upon-Tyne, East was present; but he did not oppose it.

Mr. Blenkinsop: My hon. Friend is aware that it was on this matter, on which I expressed my views to the Public Accounts Committee, that I resigned from that Committee.

Mr. Benson: My hon. Friend did not resign at that meeting and he did not exercise his right, which was exercised by a number of other members at that meeting, of voting against the Chairman's draft report. If I remember rightly, he had put down an Amendment, which was entirely out of order, because it was contrary to the law, and I ruled it out of order; but the hon. Member did not stay to oppose the Committee's proposal.

Mr. George Chetwynd: As my hon. Friend the Member for Chesterfield (Mr. Benson) is so much opposed to the idea of giving £50 million to the Fund, may I ask whether he opposed it when it was introduced by my right hon. Friend in 1946?

Mr. Benson: No, I did not oppose it. I merely say that it was bad finance. If I were to oppose bad finance every time it appears in Finance Bills, I should make one long continuous speech lasting years.

Mr. Hale: Why not?

7.45 p. m.

Mr. Benson: I do not have the fluency of my hon. Friend. I wish I had.
Again, one of the criticisms of this Fund could not emerge until some years after it had been in existence. The Fund amounts to £50 million and has accumulated interest of nearly £10 million and during the twelve years of its existence only about £750,000 has been spent from it. Had the Fund been necessary, had it served an obvious public need, possibly the granting of £50 million to the Government for a period of twelve months—at least, for the term of the financial year—might have been justified, but to leave this growing sum of more than £50 million year after year under the control of the Government is thoroughly bad finance. It is not as though it affects the Government's ability to buy land.
The Financial Secretary referred to the desirability of having a fund. Up to a certain amount, I agree. It is seldom that the Government will be faced with the problem of buying land worth more than £10 million. That amount is entirely adequate for any purpose such as was mentioned by the Financial Secretary. There is always the Civil Contingencies Fund to reinforce the Government and there is always the possibility of a Supplementary Estimate.
There is no evidence whatever that the curtailment of the Fund to £10 million will in any way prejudice the possibility of national parks. It is irrelevant to national parks, because the Government cannot spend it upon them. If they want national parks, they can find the money for them in the ordinary way, by introducing an Estimate or a Supplementary Estimate. As a member of the Public Accounts Committee and Chairman of the Committee which made that recommendation, I maintain that the Government are right in making this cut in the Fund.

Sir James Henderson-Stewart: I do not want to butt into this interesting dispute between the Front and back benches of the Opposition, but I think that the Financial Secretary has done the Committee a service in explaining the finance of this matter and I do not quarrel with him about it. Most of us will agree that the House of Commons must maintain control over

large expenditure. What troubles me, however, is that there has not been large expenditure. Speaking for Scottish interests, we think there ought to have been somewhat larger expenditure.
I am not asking for the moon, but when one is approached by the National Trust for Scotland, by Lord Wemyss in a recent letter, I feel that I ought to represent his view to the Committee and invite my right hon. Friend to consider it. We know from what has happened that facilities are made available to enable people to hand over property in lieu of Estate Duty. That is a good thing. What troubles the National Trust in Scotland, and troubles me, is that when we have those properties they are not being properly endowed, or there may not be adequate provision for the endowment of future properties. Apart from those particular properties, others throughout the country which may be of priceless value to the nation ought to be managed by a body of this sort and ought, therefore, to be endowed.
My right hon. Friend the Chancellor of the Exchequer, in his Budget speech, said that the policy is not being altered and my hon. Friend the Financial Secretary repeated that today. I should be satisfied if my right hon. Friend, when he replies, will give me the assurance that he will consider to what extent the Historic Buildings and Ancient Monuments Act, 1953, can be more fully used for the purpose of giving endowments, which under existing law are supported by the National Land Fund. In other words, that public-spirited bodies like the National Trust, while not asking for anything absurd, should not be so discouraged in their work that they are inclined to throw in their hand.
This is a very important job Parliament has to do, the preserving of the heritage of our countryside, and I simply ask for the assurance of my right hon. Friend that this financial change which is taking place, far from discouraging will encourage the preservation of these splendid places.

Mr. Woodburn: I should like to reinforce what the hon. Gentleman the Member for Fife, East (Sir J. Henderson-Stewart) has said. I happen to be a member of the National Trust for Scotland, and its members are a little concerned about this reduction of the Fund.


Their fear may, perhaps, be unjustifiable, but they certainly have the feeling that if there is not this Fund to preclude the necessity for separate budgeting it will be more difficult to do some of the things which are vitally necessary.
We have not in Scotland any national parks under legislation. Preservation of the countryside in Scotland is a matter which is dealt with by the Nature Conservancy, by the Forestry Commission, which has forest parks, and by the local authorities. The local authorities agreed, when I was Secretary of State for Scotland, that they would so act as to preserve the beauties of Scotland and save from spoliation some of the finest scenery of this country.
For instance, Loch Lomond becomes very largely the responsibility of Dunbarton County Council. If under the legislation coming along there is to be a block grant affecting everything a local authority is doing, that will mean that the whole expenditure affecting such a beauty spot as Loch Lomond and its preservation will fall on one county council, although, quite clearly, Loch Lomond is a national beauty spot which ought not to be the responsibility solely of Dunbartonshire. Glasgow and other parts of the country should help.
One of the last problems with which I was concerned as Secretary of State was that of Glen Affric. The owner had decided that he must cut down the trees in Glen Affric, strip Glen Affric for economic reasons. Is there any Member of the Committee who does not recollect the row there was about the proposals to involve Glen Affric in the hydroelectricity schemes? The Government of the day had to withdraw a Bill because of the protests from hon. Members from all parts of the country against the spoliation of Glen Affric. What would have been the outcry if Glen Affric had been stripped of all of its trees merely because the owner for economic reasons had to cut them down? Fortunately, the Secretary of State for Scotland has a number of powers within his grasp, and I was able to bring in the Forestry Commission to help.

Mr. Godfrey Nicholson: On a point of order. This Clause has nothing to do with a change of policy. It concerns a piece of financial machinery.

How is all this discussion of national parks and of Glen Affric in order? I should be grateful if you would explain,
Mr. Hynd.

The Temporary Chairman (Mr. H. Hynd): As I understand it, the argument raised from both sides of the Committee is that this proposed reduction may affect the expenditure on certain matters in which hon. Members are interested.

Mr. Woodburn: I am sorry if I did not make myself clear to the hon. Member for Farnham (Mr. Nicholson). I pointed out that the National Trust and other bodies are afraid that if this Fund is changed from £50 million to £10 million it may be necessary for the Government to come to Parliament every time there is a proposal to take over property, and that it may be a handicap to doing what is necessary and may sometimes prevent from being done what ought to be done.
I am sure that everyone in the Committee recognises Glen Affric as one of the most beautiful places in Europe, and I was mentioning it as an example of a beauty spot which ought to be preserved, but for whose preservation there was no fund which could be used because it was not an historical building but a beauty spot. However, as I was saying, I was able to employ the Forestry Commission to see it was preserved.
There are other places in Scotland of like character. There are the Beech Hedges, for instance. The National Trust was offered a property where a wealthy owner in the past had laid out one of the most beautiful gardens, which people came from every part of the world to see, and there are other places of like great value to the nation. The National Trust, as has already been pointed out, was unable to accept the property because, while it could have got the property, it could not have maintained it. That property was in Dumfries-shire, I think. There is another beautiful one in Ross-shire, which everybody would desire to preserve.
I think that the Financial Secretary suggested in a reply to me that there was going to be a difficulty in getting money in the future for these things. I hope he did not mean that.

Mr. Powell: No, I did not.

Mr. Woodburn: I asked the hon. Gentleman for an assurance that this would not make it more difficult, and he said that this Clause had nothing to do with that. That sounded to me as though he was avoiding the point, and when a Minister avoids a point one is apt to be suspicious. I am glad to hear him say I was not justified in thinking that.
It is right and proper that this matter should come before the Committee, and the Committee ought to consider whether the whole purpose of the Fund should not be extended to cover the maintenance of beauty spots and to securing land as well as buildings for the nation, and a great many other things, which could justifiably come within the Treasury's policy of accepting property in lieu of Estate Duty. If that could be done by providing an endowment, as the hon. Member the Member for Fife, East suggested, as a legitimate purpose of this Fund, that would be a means of maintaining these places.
One of the problems facing the country is the disappearance of the people who used to maintain some of these beautiful houses in the country. I have always taken the view that if some of these magnificent buildings, Chatsworth, and so on, were destroyed simply because there was nothing and no one to keep them in existence, the nation would lose things of great value. We may be doing away with our noble families in one way or another, but there is no reason why we should do away with some of the wonderful structures their ancestors created, even in places where there is nothing else on which to feast the eye.
I found it a great embarrassment to be an inheritor of the Duke of Richmond and Gordon and to get Gordon Castle handed to me. I tried hard to find something to do with it. One person volunteered to make it a family holiday home. I do not claim it was of great historic importance or architectural beauty, but I regretted that it should have to be pulled down, and sought to save it. Finally, a great part of it had to be pulled down.
One of the problems before the nation is how to preserve such buildings and beauty spots when their former owners cannot. There ought to be a national policy for the purposes, for if there is not, or if the National Trust cannot maintain them, the nation may lose them.
I ask the Financial Secretary not to consider this matter merely as one of bookkeeping, as my hon. Friend the Member for Chesterfield (Mr. Benson) tried to do. A big problem lies here. It is not and ought not to be a question of our acting as a sort of chartered accountant and correcting the Government's books. If it is only a fiction there is no reason why the fiction should not remain. If it is not doing any harm, why change it?

Mr. Benson: If this is a good policy for landed families, why not vote thousands of millions for the Army?

Mr. Woodburn: Nobody ever objects to money for the Army. [HON. MEMBERS: "Oh."] We spend hundreds of millions on armaments without Questions being asked in the House.

8.0 p.m.

Mr. Hale: My right hon. Friend really must not say that. I have spent my time protesting against military expenditure for the last twelve years and have been told off by party leaders, Whips and colleagues. I have taken every opportunity of doing it and I propose to go on doing it.

Mr. Woodburn: My hon. Friend may catalogue those occasions, but I still say that hundreds of millions of pounds for arms have come out of the Treasury without discussion, and yet if my hon. Friend wanted a sum of £5 million for the national parks he would find it very difficult to wring it out of the Treasury by special supplementary estimate.
This is a policy on which the House of Commons has agreed, and the handing over of these properties is a problem. I can give three examples which will eat up the whole of this proposed £10 million. Chatsworth will take a very big part of it. Charlotte Square in Edinburgh is considered to be one of the greatest examples of Adams architecture. The Marquess of Bute bought it to preserve it for the nation, and it will probably be handed over to the Treasury in lieu of death duties. Will that square be lost? Will it be turned into offices. Will all the amenities which were preserved by a wise man who happened to have the means be lost to the nation if the National Trust or other bodies concerned are not able to maintain the square?
Two noble Lords died recently and very tragically left little or no money. One left £450. Now his widow has died and a great amount of death duties must be paid on the widow's estate. Part of that estate probably will now be handed over to the National Trust. If the Trust is asked to accept it, will the Treasury make available money from this Fund to maintain the property? When Chatsworth and the two estates I have mentioned come to be dealt with they will make a big hole in the £10 million. If expenditure goes beyond £10 million, can we have the assurance of the Chancellor and the Financial Secretary that their policy will not be more stingy when the sum has gone beyond that figure than it will be up to that figure?
I hope that the Financial Secretary will not treat this matter as a chartered accountant's argument about balances and keeping accounts. This is a great human problem of the nation's heritage. An old system of society is decaying and it is handing over to us a heritage. What shall we do with it? We have no policy yet. Do not let us destroy the great wealth and beauty accumulated by people who tried to create and develop beautiful things for the nation. Do not let us lose all that, not as a result of a change of policy but as a result of a change in the means by which that policy is to be carried out.

Mr. Nicholson: I listened with the deepest sympathy, and indeed with some emotion, to the right hon. Member for East Stirlingshire (Mr. Woodburn). I am sure that he voiced the opinion of every hon. Member. His was indeed a noble protest against a materialist moment in society. It is easy enough to get money for armaments or for agriculture or for anything material, but it is almost impossible to get money for the preservation of old houses and ancient monuments, and it is very difficult to get money for the purchase of works of art, which are rapidly being exported to America. I welcome the right hon. Gentleman's protest. I wish that every hon. Member shared the views which he expressed so forcibly, but we are up against something different in the Clause. The plain fact is that this Fund has not been used for this purpose.

Mr. Blenkinsop: This Fund has been used very modestly for the purpose of accepting properties. That has been one

of its uses, but anxiety is expressed on this side of the Committee whether the reduced sum now proposed in the Bill will be adequate to meet even that limited purpose, never mind any wider purpose.

Mr. Nicholson: But it has not been used in its entirety for this purpose, or even in the greater part. We are living in a world of illusion and delusion if we think that this Fund in its present form in any way safeguards our national heritage. It does not. It has been a complete fiasco. Whether due to the miserliness of the Treasury or the narrow mindedness of Governments, in the main it has failed in safeguarding our national heritage.
The question is whether this matter should be put on a more realistic footing. The right hon. Member for East Stirling-shire may sneer at mere principles of accountancy, but it is the duty of the Committee to try to reintroduce some measure of reality into the Fund. We should be on a much safer basis in urging the Government to spend money on Chatsworth or some wonderful picture or a National Park if a supplementary estimate had to be produced ad hoc. There is danger in the present form of the Fund. It leads us to think that everything is all right and that the National Trust has large sums of money at its disposal.

Mr. Woodburn: Is it not the fact that in all the years during which the Fund has been in existence there has been no danger? Consequently, can the hon. Member on his conscience say that it will be as easy for the Treasury or the Government to carry out the purposes for which the Fund was created if the Fund does not exist in its present form and the Government have to come before the House of Commons every time an estimate is required?

Mr. Nicholson: Yes, I think so. I say that the Fund is dangerous because it gives the general impression that there are large funds available if the necessity arises. Consequently, necessity has arisen and nothing has been done. There has been a continuing uglification of the country and a continuing loss of our national heritage. There has been a tendency to say, "My dear chap, it is all right. We have these large sums at our


disposal and if the cause is deserving they will be spent on it." The money is not spent and the Fund is no safeguard.
When a great house is liable to be dispersed or a great national heritage destroyed we shall be on far safer ground if we have to make an ad hoc approach to the Government of the day. I do not like this untidy way of having these tens of millions of pounds loose, completely unattached and outside the control of Parliament or Government. Sooner or later we must bring ourselves to the jump, and we must force the Government of the day to spend money on preserving these great treasures. The sooner we get rid of this illusory line of defence the better.
Let us face the fact that as a Parliament we have neglected our duty. We are not caring one-quarter enough about things which should be preserved. In almost arithmetical progression the pace gets faster in the loss of our national treasures and heritage. The existing provision is a make-beileve defence. Let us get down to brass tacks and ensure that each time something has to be preserved or defended we force the Government of the day to do it.

Mr. Chetwynd: I was amazed at the very arid and mathematical approach of the Financial Secretary to this problem. I was also astounded by the speech of my hon. Friend the Member for Chesterfield (Mr. Benson). He has left the Chamber, so I will reserve any comments I have to make on his speech in case he should return.
As to Parliamentary accountability, it is absolute nonsense to say that this Fund has gone out of the control of the House of Commons. Every year an account is published of the National Land Fund in complete detail which it is open to us to question and raise in debate if we feel so inclined. So it is rubbish to suggest that by having £60 million instead of £10 million we have lost Parliamentary control, whereas if the Fund was reduced to £10 million we might recover Parliamentary control in some miraculous way.
I would never believe that the Chancellor is responsible for this Clause. He is far too robust a person for such a niggling thing. I believe it is the work of an arid Treasury official in a dark garret of the

Treasury who has never seen the light of day.

Mr. Ede: The hon. Member for Chesterfield (Mr. Benson)?

Mr. Chetwynd: I was coming to that. As my hon. Friend the Member for Chesterfield was speaking, I thought that he must be responsible.
What we are arguing about is whether this Fund shall be reduced from £60 million to £10 million and how we are to get rid of the £50 million. The Treasury wants to wipe the slate clean, to make a nice bookkeeping account, to have a tidy audit and to start again with £10 million. I want to see the £50 million spent, because that was the original purpose for which my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) created the Fund in 1946. It was not to have the scheme hanging about in a dusty file. It was to spend this money on worthwhile purposes, to help to create a more beautiful Britain for the people to enjoy. If we could not own the land, at least we ought to be able to enjoy it. That was the major purpose of the scheme.
If, then, we go back to the original intention of the 1946 Act, it was, in my right hon. Friend's words, to be a nest egg for the future development of national parks when legislation should bring them about. We have now reached the stage in their development when there are about ten major national parks in operation, with areas of special beauty designated. At this stage, it is clear that we ought to be using the money for that purpose.
The second point was to reimburse the Treasury for death duties, in lieu of which it had received land or property. Again, it is clear that we are reaching the stage when larger properties will become available that we desire to take over for the nation, to endow them, to allow the public to enjoy them. Here again, it is obvious that large sums of money will have to be spent.
The third purpose which was mentioned comes under the Historic Buildings and Ancient Monuments Act, 1953. Here, too, we need a greater development, a greater speeding up in the purchase of historic buildings, their contents, and the land. In different parts of the country there are beautiful mansions, castles, and


so on, becoming more or less derelict for lack of proper attention. Here is something on which we ought to spend this money.
For instance, if the Duke of Norfolk runs into great difficulties over Arundel Castle, I would have thought this was an admirable building which could be dealt with through the National Land Fund. It is not a place of architectural beauty, but I understand that its contents are worth while preserving.
Then we come back to the 1949 National Parks Act, which at that time did not make provision for making use of the National Land Fund as my right hon. Friend had intended. My hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) has explained why that was so. At that time, it was necessary that we did not alienate the good will of the county councils, who were a little afraid that their independence would be taken away if the national parks were really what they were meant to be and not just local parks.
But that is no longer the case. The County Councils Association, in conjunction with the National Parks Commission, through the Minister of Housing and Local Government, and through him, I hope, the Treasury, must try to get this altered. They must try to get the National Land Fund extended to cover the development of national parks.
I believe that the main reason why the Public Accounts Committee acted as it did was because it saw no foreseeable need for this Fund. I would cause a revolution in the Treasury if I had my way. Instead of saying to it, "See what money you cannot spend, see what you can save on, see how you can economise," I would give an instruction about the Fund in these words, "Go out and see what you can spend money on," and it would not take them long to find sufficient worthwhile projects to use the whole of the Fund.
8.15 p.m.
We would need an Amendment of the Bill to bring national parks into the ambit of this Clause, but that would not present any great difficulty. We could give a great fillip to the work of providing national parks by spending more money, and we would fulfil the purpose of the Act and make the people of this

country national park conscious in a very short time.
I will give two examples of where the work of the National Parks Commission is hamstrung by lack of finance. The Report of the National Parks Commission, since its inception reveals, shows, in page after page, how it is being frustrated by lack of finance. Dealing with the question of litter, on Dartmoor it states that the Committee
… had hoped to appoint a part-time ranger, but this has proved impracticable owing to the need for a cut in the estimates. They have, however, been able to secure the services of a voluntary warden. They have organised other voluntary assistance, and have spent what money was available to them for this purpose by engaging a contractor who, over a period of ten weeks this summer, collected from particular black spots between 50 and 60 tons of litter which had been left behind by the public.
The National Parks Commission wants to engage in an anti-litter campaign. I can say from my experience that we must be the most untidy nation in the world. The Commission is hamstrung by lack of finance.
Regarding the North Yorkshire Moors, an area of great national beauty, the Report states that the Park Planning Committee wish to embark upon the provision of car parks and lay-byes, and they propose to build seven additional ones. However, the Report continues:
As in the case of other Parks, the restriction of capital expenditure will curtail the Committee's activities.
There are innumerable ways in which the attractiveness of the national parks could be improved if only the necessary money was available. I am thinking of sites for hostels, new camping and caravan sites, screens of trees to hide ugly places, the development of a ranger service, the building up of information centres, and so on, extra publicity, the development of long-distance roads. All these ought to be a national charge and not a local charge, and this fund is the ideal instrument for that purpose.
It seems that the Chairman of the National Parks Commission was right in pressing the Government on this point, in order, as he said, that the Government should be able to demonstrate its real interest in the National Parks scheme. Yet what we have seen on the part of the Government is a complete lack of interest


in its development, and that is to be deplored. The second reason he gave was that the use of this fund would stimulate public interest, on which the national parks must depend. The third, and perhaps the most important, was that it would encourage park planning committees to plan ahead, so that they could be sure over a period of years that they would have adequate resources for engaging in longterm planning, which is so essential for the beautification of our national parks.
Therefore, I believe that the Chancellor is taking a retrograde step in cutting the Fund to £10 million. The effect of the block grant will further cripple this work, and I believe that it betrays a total lack of imagination in the Treasury on this question. We are having the arid approach of the accountant to it instead of that of my right hon. Friend the Member for Bishop Auckland.

Mr. Vane: Listening to the hon. Member for Stockton-on-Tees (Mr. Chetwynd) and the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), the Committee might be led to believe that my constituents, most of whom live in a national park, will have their whole future life changed as a result of this simple Clause. It will not affect their future by as much as twopence. Such policy as may be for development of national parks is not affected in this way to the smallest extent.

Mr. Blenkinsop: I am sure that the hon. Gentleman has received a copy of the letter from the County Councils Association putting forward its views on the matter and its anxiety that the Fund should be used for the purpose of national parks. Will he not agree that it would not be at all difficult to make a suitable legislative amendment to enable the Fund to be used in the way originally intended?

Mr. Vane: I have received several, not a great many, letters on the subject recently, and my recollection is that they were all exaggerated.
The hon. Gentleman knows, because he and I have discussed this on a number of occasions, that I have been interested in the subject. We have, however, never really agreed about quantity; the hon. Gentleman has always wanted to go very much further than I have. I do not think that he had a very strong case to argue

today, and I believe he knew it was not a very strong case, or he would not have exaggerated as he did by arguing for the "abolition" of the National Land Fund. That was a misuse of the English aanguage. A reduction from £50 million to £10 million is not "abolition". The same spirit of exaggeration appears at intervals throughout his speech.
When the Fund was set up by the right hon. Member for Bishop Auckland (Mr. Dalton), I always supposed that he and many others—I was among them—who supported it expected that the early stages of setting up national parks would be a great deal more expensive than has, fortunately, in the end proved to be the case. Events have shown that a sum of money of the size originally proposed was not needed for the purpose.
I am extremely glad that it has been found possible to set up national parks without wholesale acquisitions of land within their boundaries. The hon. Member for Stockton-on-Tees seemed a little nostalgic and disappointed that there had not been more acquisitions of land. I am sure that most people, particularly those who live in the areas concerned—about whom nothing has been said from the Opposition benches during our debate—are far from anxious that that sort of development should take place.

Mr. Blenkinsop: I am sure the hon. Member will remember that I made the point that, for example, people living in those areas were fully entitled to electricity and that the extra costs involved in protecting the countryside at the same time should be borne not by them, but by the nation as a whole.

Mr. Vane: I agree that the hon. Member mentioned that. I did not want to embark upon a long argument about the merits and demerits of the case and the cause of the delay in providing electricity in the Lake District, because if we did that we should be here until very late at night; but I think that the case against the Clause is greatly exaggerated and that hon. Gentlemen opposite know that their case is not as strong as they represent it to be. The sum of £10 million is a very substantial one to have in a Fund of this sort for such purposes as Parliament has so far laid down.
I was pleased to hear the right hon. Member for East Stirlingshire (Mr. Woodburn) refer to the work with which


the right hon. Member for South Shields (Mr. Ede) and I have had something to do as members of the Historic Buildings Council. The right hon. Gentleman exaggerated when he was speaking of the difficulties of the National Trust. I admit that he was speaking of Scotland, where things are perhaps somewhat different from England, but I do not think that he was wholly accurate in the detail of his argument. That did not affect his general principle, that here we have one of the uses of the Fund.
So far, the money from the Fund has been spent under two heads. One purpose has been to reimburse the Revenue for lost Estate Duty when certain properties have been taken over in lieu of cash. We have had nothing to do with that side, but we have been given the responsibility of making recommendations to the Minister of Works about the acquisition of certain properties of outstanding architectural, historic or artistic interest, their contents and surrounding land. I think that is where the right hon. Member for East Stirlingshire went a little wrong when thinking about the National Trust in Scotland.
The first stage is limited, I think, to £500,000. So far, in the course of the several years that we have been working we have not yet reached that sum. Many of the arguments which we have heard from the Opposition benches tonight would have been far more relevant if we had made very large inroads into the different sums under the various authorities which Parliament has given Ministers, but we have not, in fact, yet found that there has been such very great pressure under this head, although I should not like to say that in the future the pressure will not greatly increase. Then, and not now, is, I think, the right time to consider how we shall finance those future purchases.
Hon. Gentlemen opposite have talked about the voluntary societies and "pinning their hopes" of the future on the Fund. I see no reason why the National Land Fund should be treated as a kind of sacred cow or something untouchable. as though if its scope is changed their future will be changed with it. It really is not so. The Financial Secretary has said that no change of policy is intended by the Clause.

Mr. Blenkinsop: It is the very fact of the present policy about which we are arguing. It is because, as everyone has surely agreed, insufficient financial assistance has until now been given, and because even worse circumstances are likely to arise with the change in the grant position vis-à-vis local authorities, that nearly every amenity body which is at all concerned in the matter has been aproaching us about it.

Mr. Vane: If all amenity bodies are so concerned, they ought really to think again, because it just is not worthy of their concern. The hon. Gentleman and I have discussed this in the past, and he knows that I have been anxious to have more money to be spent on these purposes, but I have never thought the problem anything like as big as he has tried to represent it today.
The case which hon. Gentlemen opposite have tried to deploy today is a great exaggeration. I am surprised to hear the hon. Member argue in the terms in which he has done. He has been a member of the Public Accounts Committee in the past, as I have been. One of our financial principles is not to put money into a number of special funds which do not come under normal Parliamentary control annually; generally, we prefer to have money voted by the House of Commons every year. There may be occasions in special circumstances when we wish to follow a different procedure, but in the light of what has happened over the last ten years I cannot see any case for continuing the National Land Fund at the size originally proposed, or for making the fuss that we have heard from the Opposition benches today.

Mr. Ede: The hon. Member for Westmorland (Mr. Vane) said that we treated the National Land Fund as a sacred cow. We think that the cow ought to be milked. The Government have turned it into beef.

Mr. Vane: There is a surplus of milk.

Mr. Ede: Unfortunately, there is not a surplus of this kind.
8.30 p.m.
As President of the County Councils Association, I think that the Association's letter was justified, but it had nothing to do with the Clause, because it was written in February and we did


not hear about the proposal to reduce the Fund until the Budget. It was an indication from a responsible body, speaking for the Westmorland County Council, among other bodies, and anxious to see that what is very largely a benefit to the urban districts and especially great cities should not be borne to the extent it is now borne by the rural counties which are not blessed with the rateable values which the great cities and some of the more urban counties enjoy.
My hon. Friend the Member for Chesterfield (MT. Benson) is far too modest in having retired from the Committee so soon after making his speech, for he is the first chairman of a subcommittee of the Public Accounts Committee to have managed to convert the Treasury to adopt what he has advocated. The fact that we have these exceptional circumstances with which to deal is a further warrant for looking into the proposals very carefully. My hon. Friend the Member for Chesterfield, who for a good number of years has addressed us on Finance Bills, has at last managed to achieve, I will not say fame, this notoriety. It is a pity that in announcing his decision during the Budget the Chancellor did not give dishonour where dishonour was due.
I am not very much concerned with some of the book-keeping matters with which we are dealing. With the hon. Member for Westmorland (Mr. Vane) I serve on the Historic Buildings Council. I hope that he will agree that on occasion we have to draw the line very tightly in what we recommend because of the limited funds at our disposal. It is true that we have not spent the amount which is allocated to us for each year, but that is due to the fact that some of the very large grants which we have recommended can be used only over a period of years. The highly skilled labour required for some of this work, where one is dealing with some of the finest examples of craftsmanship and architecture, is not available in sufficient quantities to enable some tasks to be done at the rate we would like.

Mr. Vane: Where we have to draw the line most tightly is where we are dealing with the £250,000 or £350,000 a year voted money and not with the sum from the Land Fund about which we

can make recommendations for purchases. That is not where we are tight. It is the other side.

Mr. Ede: The hon. Member has jumped in too soon. I was about to say that further assistance from the Land Fund, if necessary provided by fresh legislation by Parliament authorising us to spend it, will enable us sometimes to deal with very urgent matters, where some ancestral mansion has had a leaky roof for a generation and a half, and where the whole of the interior is very rapidly deteriorating, and where quite irreplaceable chattels of great historic value are in danger.
After what the Financial Secretary said about the exact effect of the Clause, I hope that we may look for some signs from the Government of believing that greater expenditure in this matter would be felt appropriate. I accept all that has been said by my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) about the need for better financing of the national parks. But there are many other ways in which the gracious life of the past can be brought to the full realisation of a materialistic age.
When I was in the United States of America recently I visited the city of Salem, and in an address which I gave subsequently I commented upon the example that Salem was of the gracious life that had been lived there by a previous generation. A gentleman who was proposing a vote of thanks to me said that he was astounded to hear a Socialist talking about the gracious way of life. My wish is that a far larger proportion of the population should be able to live the gracious way of life than has ever been the case before. I value these ancient mansions and their history and setting because of the story they tell of the gracious way of life—when the graciousness was reserved for a very small minority of the nation. I hope that we shall be able to preserve these things as an example to a materialistic age of the way in which great refinement and enjoyment could be obtained by people of an era that is vanishing.
When I was in the infants school I was taught:
The rich man in his castle, The poor man at his gate, God made them, high or lowly, And order'd their estate.


When I repeated that to my mother on coming home from school, she said, "I am having no such blasphemy in this house". The National Union of Agricultural Workers has rewritten the verse as follows:
The poor man in his castle Stands waiting at the gate To gather up the florins To salvage the estate.
The hon. Member for Westmorland and I know that, heroic as are the efforts of some of these noble families to preserve their estates and share their heritage with other people, not one of those propositions is so far a paying concern, and the probability is that they lose more than they make, particularly when Income Tax on the collection is taken into account.
We live in a time that has seen a tremendous social change. If all that is gracious in the past—in which a minority lived in graciousness—is to be preserved for the future, it will have to be by national efforts. I assert that it must be national, because we cannot thrust upon rural counties the task of keeping recreation grounds—whether for the mind or the body—for the great cities. Everybody has to share. I hope that what the Financial Secretary told us tonight means that the ideas that my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) had in mind when he founded this fund still dominate the Government, and that as widening needs are revealed the purposes to which the fund can be put will also be widened, for I am certain that if we neglect the duty that falls upon us today succeeding generations will be much the poorer, and we shall be blamed for having allowed so many noble things to disappear.

Mr. J. Grimond: As one who, for many years, was associated with the National Trust of Scotland I want to say a word or two about the Clause. I will not go into the metaphysical argument as to when a fund is not a fund. I have always been led to suppose that this Fund was an entirely bookkeeping transaction and was like the grin on the face of the Cheshire cat—that it was an indication of intentions—or perhaps it was the smile on the face of the right hon. Member for Bishop Auckland (Mr. Dalton)—an indication that he would look favourably on certain

projects for maintaining houses and their contents, land, and so forth.
The original intention was that the Fund should be available to enable the Government to take over houses and land in lieu of the payment of Estate Duty. I would have hoped that at some time we could have been told—from a Treasury point of view—why such a very small use was made of the Fund for that purpose. I know that many questions have already been put to the Treasury, but they will probably not be answered in this debate. I suspect, from my experience with the National Trust of Scotland, that one reason for the small use made of the Fund was touched upon by the hon. Member for Fife, East (Sir J. Henderson-Stewart), namely, that it is the question of upkeep that is so difficult, because for that purpose very inadequate sums are usually paid.
I think it also true to say that while it has sometimes been possible to get large amounts for a particular object, to take over a house or some land, or something of that kind, it has been much more difficult to get money for general administration. We cannot keep this process going unless we have fairly large unattached funds which may be used for general purposes, for the payment of staff, and so on.
I hoped that we should hear how the Government will deal with further objects about which the right hon. Member for Bishop Auckland spoke when setting up the Fund, I should like to know the feeling of the Government about this. Are they going to provide money for the adequate upkeep of museums, for example?
Take the question of the purchase of pictures. It is a horrifying state of affairs, when a picture is sold for £104,000, while many of our best picture galleries get grants of £3,000 or £4,000 a year. It may be that we should not give any grants at all, but to give such derisory grants is to achieve neither one thing nor the other: we get neither good pictures nor economy.
We read about the gigantic bill for the restoration of Oxford, and that might be the sort of further purpose which the right hon. Member for Bishop Auckland had in mind when he set up this Fund—[HON. MEMBERS: "Not Oxford."] Well,


the right hon. Gentleman is a broadminded man and his ideas might have extended even to Oxford.
Then there is Nature Conservancy, which has come into effect since the time when the Fund was originally set up. While the Government have stated that their policy is not changed I hope that they will go further and say that however big may be the call for the preservation of buildings and the acquisition of land, at least they have the matter in mind and are examining the ways of meeting it.
Now I wish to say a word in defence of Governments. It has been hinted that they have been stingy and niggardly and that nothing has been done. But when I was Secretary of the Trust I remember going to see the Treasury when the late Sir Stafford Cripps was Chancellor of the Exchequer. I think that we should put on record that he made grants to both National Trusts and there have been other substantial Government grants made for the acquisition of buildings and works of art. With the rise in prices they may not have been enough, but it is not entirely true to say that this matter has been neglected. We had the Historic Buildings Act, and the Gowers Committee went into the question at some length.
I urge the Government to follow up the work which has been done. I think that a foundation has been laid. I do not mind whether it comes out of the Consolidated Fund, or if there is a special Act of Parliament, or how it is done, but there is no doubt that on today's values we shall lose from this country absolutely irreplaceable works of art unless we are prepared to make bigger grants for their acquisition and for their upkeep in museums, country houses or galleries.
I believe that, first, we should concentrate on consolidating and maintaining our existing national heritage. I feel that we give totally inadequate grants to existing museums and galleries and inadequate support to the existing National Trusts. I believe that there is much to be done. A great deal of land has been acquired for the Government and is available to the public. I agree that we have to go further, but there is a tendency towards acquiring new little bits of property here and there and allowing what we have to fall into disrepair, or else to give inadequate sums for adminis-

tration, if it be houses, or for general upkeep if it is land.

Mr. Tudor Watkins: There is an old saying that ideas make institutions and institutions kill ideas. My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) had the idea of laying aside money in a Land Fund particularly for national parks. I thought that a splendid idea. I admired him for making the statement and I hope that the idea will not be killed now by the "Benson institution". I am very interested in the question of national parks, and I am concerned about it from the point of view of Welsh interests. We have had speeches from hon. Members representing Scotland, and I think it is now my turn to speak about the national parks in Wales. There is more land in Wales which forms national parks than in England and Scotland. We have Snowdonia, the Pembroke Coast and the Brecon Beacons, which has been made a national park within the last month, and places of outstanding beauty, particularly Gower and the Lleyn Peninsula and other places of nature conservancy.
8.45 p.m.
I am concerned about the future administration of the National Land Fund at £10 million. I wonder whether the Financial Secretary would tell us, in view of all the ideas which have been put to him this afternoon, whether in future years, if he finds he has not sufficient funds, he can make a book entry of additional money to that supposedly nonexistent Fund. I am sure that I and many others will welcome any entries that he can make to it.
I hope that the Financial Secretary will consider a few suggestions. He may reply by saying that they would require legislation, but I am sure that it is not beyond the wit of the Financial Secretary to suggest to his right hon. Friend the Chancellor that he should try to find some method of legislation to meet the points which I am going to suggest with regard to the national parks. A grant of 75 per cent. is low in some of the counties which are interested. There is a reluctance on the part of local authorities to find the other 25 per cent., because they say—and this is a legitimate point which they put forward—that these are national parks—that they belong to the nation. They do


not belong only to Breconshire, Caernarvonshire, or Pembrokeshire, but they belong to the nation, and, therefore, they are a national responsibility.
I am sure that some method could be found by which money from the Land Fund could be used for certain requirements of the national parks. I can give instances of the low product of a 1d. rate in some of the counties in Wales covered by national parks. In Merioneth it is £1,300, and the rate for the county at the present time is 14s. 6d. In Brecon, it is £1,935 with a rate of 14s. 6d., and in Pembrokeshire it is £2,954 again with a rate of 14s. 6d.
In all the Reports of the National Parks Commission we find some observations about proposals which are required. In the last but one Report, we find Pembroke making proposals with regard to providing accommodation for visitors. The local ratepayers could not possibly find the revenue for that purpose. I am certain that before the end of the week we shall have some information about the future of local government finance. Judging by rumours, local government finance in the future will not help national parks when it comes to the block grant basis. Therefore, the Financial Secretary might use this nest egg to meet the proposals which the National Parks Commission in their Sixth Report suggested were in line with the intentions of the Fund.
One remembers the London conference of the Park Planning Authorities and the County Councils Association. They put forward a proposal. If they had known what we have been told today, those ladies and gentlemen would not have taken the view they did of the Land Fund. Nevertheless, I am very glad to find that there are youth organisations which are greatly interested and concerned about the national parks.
The Festival of Wales Committee in Wales next year will, I hope, give great publicity to the new national park at Brecon Beacons. I am sure that it would be glad to find financial assistance coming not only from visitors going to that particular part, but from any means that the Government can lay their hands on in order to support it. I am sure that if the Chancellor were here—part of that National Park comes into his constituency and he had the opportunity this weekend

in attending fetes to admire the national park—he would in his heart not be against allowing the Land Fund through legislation to spend some of its money on that national park.
Has the Minister any information about the future of national parks? Has the Minister of Housing and Local Government yet replied to the suggestions made by the National Parks Commission in its last Report? All he did was to acknowledge the letter on 3rd February, 1956. Surely information should be made available now. What is the Government's intention? The Chancellor was criticised because he did not call a conference of youth organisations to discuss what was to be done with the National Land Fund. I hope he will still call a conference to discuss assisting national parks.
I sometimes think I am a bit of an idealist, and I hope that in the near future we shall have a Minister for Leisure. He should have power to bring in Bills, and not only to look after great matters such as those mentioned by my right hon. Friend the Member for South Shields (Mr. Ede), but also to promote a means of building up the gracious life for our people. I hope that the Financial Secretary will not give us a dry intervention as he has done already, but will at least say that he will consider the ideas which have been put forward.

Mr. Dalton: Somewhere in the recesses of the Treasury there has for years existed a brief, proving to the satisfaction of the drafter of the document that there is no such thing as the Land Fund. The brief was last used, I think, by the Lord Chancellor at the time, Lord Simonds during a grim financial debate in another place. He made the same assertion that the Financial Secretary to the Treasury has made, "The thing has no real existence. There is no Fund." In between those two pronouncements I have heard no reference to this brief and I judge that most members of successive Governments have put the brief away as being unsuitable for public exposition and as unlikely to secure credence.
The plain truth is—it is as well to get it once more on the record—that in 1945 and 1946 we were selling, the war being over, vast quantities of war stores of all kinds. It appeared to me—I was advised by the Treasury that this was the right


way to proceed in order to do what I wished to do—desirable and appropriate —when the memory of the war was still fresh, when ideals were still high and when, as my right hon. Friend the Member for South Shields (Mr. Ede) has said in his speech tonight, wider purposes were before all our eyes as it seemed that the country was starting upon a great new chapter after our victory in the war—to set aside some part of that money so that, by various means, the beauty of England, the famous historical houses, the wonderful stretches of still unspoiled open country, might be preserved in the future, and that gradually, in other ways, also, the gracious life that my right hon. Friend has so well described, might increasingly become part of the heritage of us all.
It was towards that end that I caused £50 million derived from the sale of war stores to be set aside for peace stores for a wider and more spacious life. The large majority in the House which then supported the constructive proposals of Ministers of that time authorised the setting aside of this money in 1946 and authorised its being placed into a fund which has ever since been specifically invested in short-term Government securities, the details of which have been published from year to year.
The Fund has as real an existence as any other financial operation of the Government. If they are all nonsense, and none has any reality, as a philosopher, now turned into a junior Minister, tried to prove today, that may be in line with certain metaphysical doctrines; but that applies to this Fund no more than to many other of the multitude of financial operations which pass muster in the House from time to time.
I have stated the purpose of the Fund. It has accumulated, and the question, frankly, is: what should be done with all this money? The National Land Fund has behaved like a most exemplary citizen. Had it been a private citizen it might have been singled out for a decoration by Her Majesty. It has saved almost all its income every year, it has resisted all temptation to live recklessly, and it has set aside this money for great future purposes.
The question now is, the Fund having grown to this imposing magnitude: what is the Chancellor of the Exchequer

going to do with all this money, consisting of a Fund provided by me, plus the interest which has naturally accrued? What is he going to do with it? We are still waiting to hear the answer.
This Clause is a very poor answer. Apparently, he is going to tear up a number of securities and throw them into the waste paper basket. That is all. He proposes to tear up £50 million out of £60 million worth of securities and throw them away. I will not suggest how he might increase the sum by various readjustments and reinvestments. I will merely say that the fact that until now the Fund has been kept in short-term securities has been a continuing symbol of the belief that it would be spent within a short time. This was the basis which we had adopted.
What is the Chancellor going to do with this money? I hope that he will tell us a little more about what hopes we may have. The Financial Secretary held out rather vague hopes that some of the purposes which have been so eloquently advocated and defended by hon. Members on both sides of the Committee in the debate might be met, if not specifically out of the Fund as it now stands, at least by some assurance of a countervailing operation to what we regret and regard as stupid, dull and reactionary.
That is how I ventured to describe it when I spoke in the Budget debate. This is not a party issue, by its nature, and I am sure that we all hope that the first impression which I formed may be wiped out by an assurance that in the coming years there will be provided sums of money from the annual revenue which will go some distance towards implementing the hopes which have been expressed.
My hon. Friend the Member for Chesterfield (Mr. Benson) is not here and I may, therefore, perhaps be forgiven for passing over rather sadly the speech which he made. He said that it was a very narrow point. He brought to its discussion a very narrow mind. I will say no more about him than to point out that he did not rise in his place and make any comments when these proposals were originally made. I see that he has returned to the Chamber, and I welcome him. I had not proposed to dwell at great length on his intervention, except to say that I did not agree with him.
I was merely recalling—and I think he will not contradict me when I say it—that although he says that the motion for setting up this Fund was thoroughly bad finance, he did not tell me that at the time. My hon. Friend did not say so publicly in the House. He did not, so far as I remember, either speak or vote against this provision in my Finance Bill in 1946. Moreover, I look back with gratitude and appreciation to the part he played, when I was Chancellor of the Exchequer, as one of my principal unofficial advisers outside the Treasury. He was at that time chairman of the little group of Labour Members selected for their special competence in financial matters, on whose advice I frequently and heavily relied. I do not recollect his presenting to me, in that capacity either, any criticism of this plan.

9.0 p.m.

Mr. Benson: My right hon. Friend is perfectly correct. I live and learn.

Mr. Dalton: I think I can guess at some of the people from whom, in—how shall I put it?—in his sunset decade my hon. Friend has been learning. But my hon. Friend and I are in agreement on a number of the main points, and, with that, I shall not further pursue the debate with him in this Committee.
Passing, now, to the proposals which have been made for the wider purposes to which this money might now, in part at least, be applied, national parks have been mentioned much in this debate, and very properly. It was my hope in 1946, as I stated, that some of this money would in due course be applied to that purpose. It is true also, that, for other reasons which have been discussed and explained, when the Act setting up the national parks was introduced in 1949, it was for various reasons decided better to proceed by other methods.
I shall now quote the observations of one or two noble Lords, in the hope that their evidence will, perhaps, be treated as cumulative to that of hon. Members of this Committee. Lord Silkin, as he is now, who was then the Minister of Town and Country Planning, when the question of the possible use of the Land Fund for National Parks was raised, said:

So far as the Bill is concerned, it matters very little whether the finances come from one fund or another".
That was right enough. Then he said:
We can rest assured that whatever money it is necessary to expend on the purposes of this Measure, Parliament will provide it"— [OFFICIAL REPORT, Standing Committee A, 26th May, 1949; c. 480.]
That, unfortunately, has been proved wrong. My noble Friend in that respect anticipated the future with too rosy an eye. It is certainly very regrettable that the payments made from national sources for national parks have been so very small.
There was published in The Times of 7th June a very interesting article by Lord Antrim, who is Chairman of the National Trust in Northern Ireland. I have no doubt that the Chancellor will have seen it. Following on what I said in my speech during the Budget debate, when I referred with approval, and hope that the Chancellor might be willing to take a leaf out of the book of Northern Ireland, to what had been done there about this matter, Lord Antrim said that, in 1948, the Minister of Finance in Northern Ireland, following English example, established a Land Fund of £1 million. The population is much smaller, of course.
In this Act, Mr. Sinclair, the Minister of Finance at the time.
… included provision for endowment and repair of buildings, thus extending the scope of his Act to cover operations which in England and Scotland were not possible until the passing of the Historic Buildings and Ancient Monuments Act. 1953.
In this respect, therefore, Northern, Ireland, following our example, has now leapt ahead of us and made this very useful provision which we, indeed, made also, so far as the letter of the law was concerned, in 1953.
How have things gone? Lord Antrim notes the marked contrast between the way in which money has been granted from the Ulster Land Fund and the National Land Fund. The Ulster Fund is two years the younger of the two Funds, but already £260,000 has been taken from it and another £60,000 has been promised. In other words one-third of it has already been spent on these admirable purposes which are legally open to us, but of which so far,


we have availed ourselves in such a parsimonious fashion. What this points to is that we should speed up the use of part at least of the resources of the National Land Fund for these extended uses as Northern Ireland has done.
Lord Wemyss has been mentioned. He is the Chairman of the National Trust for Scotland. I did not have the pleasure of meeting him when he came here, although I should have been glad to get his views on the matter. He has been very much disturbed at the way in which the operations in Scotland may be affected by a reduction in the available sum which is left in the Land Fund.
Whether or not £10 million is the right sum to meet the requirements under the present law for some time to come, there is no doubt that the general psychological effect of this reduction and of the fact that the Government have now put it forward will be very discouraging to many people who are deepdly interested in good and admirable causes. They will get the general impression that here, too, is something marked out for ruthless economy regardless of the objects underlying the expenditure. It will have a depressing, discouraging and deflating effect upon all sorts of people who otherwise not only might have admirable ideas, but who also might have been willing to make substantial contributions to such collective funds as those of the various trusts and other voluntary bodies. Lord Wemyss, I am told, is very much disturbed at the way in which this may react in Scotland.
Pursuing the catalogue of noble Lords—Hilaire Belloc once wrote a little book of verse called "More Peers"; it followed an earlier book called "The Bad Child's Book of Beasts"—I now come to another noble Lord, who was once a Member of this House and whom we all greatly respect, the Chairman of the National Trust for England, namely, Lord Crawford. He spoke the other night on sound radio and he deplored very much another side, which, I know, has been brought before the Chancellor: that is, the danger that we shall be stripped cleaner and cleaner of valuable pictures which we would like to have in this country, in public collections and in other accessible places or in

private houses visible to the public on reasonable terms of access. This, too, is greatly endangered by present tendencies.
Here again, although legislation or a special grant in next year's financial arrangements would be required, Lord Crawford has put forward a strong argument, which is supported by many other people of judgment, knowledge, public spirit and artistic perception, in favour of an increased provision which might easily be provided from this very large sum that the Chancellor has to play with, for increased purchases of pictures and other works of art.
Finally among these noble Lords I come to Lord Strang, who is Chairman of the National Parks Commission. I think that he was going to meet the Chancellor. I hope he has been able to meet him and put his views before him. From what I know of Lord Strang's views in the past, and, indeed, from his public pronouncements, he would find it very helpful in his work as Chairman of the National Parks Commission if he could be assured of a more generous grant.
In spite of the fears in 1949 I should like to have seen the Government of the day pay a substantial capital sum in endowment of the National Parks Commission and to have let it spend it, making due reports which would have been published and made available to the House. That was not done.
Now, Lord Strang, I think, like many other people, would prefer the National Parks Commission to have the prospect of an annual grant from the Fund than to be told that everything is to be cut down. Additional legislation would be required, of course, for that.

Mr. Kenneth Robinson (St. Pancras, North): To help my right hon. Friend to complete the record, the Executive Committee of the National Trust for England and Wales, of which I am a member, discussed this matter, and the Committee was unanimously opposed to the proposal of the Government.

Mr. Dalton: That is a further piece of relevant evidence. Nobody would accuse the National Trust of being a Socialist body, or, indeed, of being in any degree coloured with political prejudice at all. It is a body which speaks for all parties and for persons belonging to no party


whose concern is the beauty of this country and the opportunities for artistic appreciation of splendid things.
I have cited a large number of persons who have expressed apprehension at this Clause. It would still be possible for this apprehension to be removed if either the Chancellor himself or the Financial Secretary could give us some much firmer assurance as to what will be done to assist the various causes, good causes I think everybody will agree them to be, which I have been enumerating.
Even though the Government insist—because the Public Accounts Committee thought they should, and for the first time for many years, a proposal of the Public Accounts Committee has been accepted by a Government of some colour—that they mum go through with this apparently destructive and stupid operation, I hope that they will, none the less—having listened to what has been said, and having taken account of all the arguments adduced by a number of people, including many noble lords, who I hope also might have weight in influencing the Government's decision—give us an undertaking, or series of undertakings, for increasing the provision to be made in the next financial year. If they do I think that we shall have not had this debate in vain. But whether or not that will be, we cannot judge until we have had a further reply from that Box.

Mr. F. H. Hayman: This is one of the most important Clauses in the Bill. It expresses the attitude of this Committee towards our great national heritages of one kind and another. Much has been said about historical buildings, much has been said about works of art, and many of them in this country are priceless. We cannot hope to retain them all. The national parks and the areas of outstanding natural beauty form one of our heritages, and I hope that not too much money will be spent on works of art or on historical buildings if, by that, we are to lose some part of the national parks and areas of outstanding natural beauty.
One of the most important purchases from this Fund was Cothele in Cornwall, a thirteenth century mansion, a wonderful place. I am glad that Cornwall has the distinction of being the first to benefit

by the Fund set up by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton).
Those of us who have much to do with national parks or follow the activities of the Commission are frightened at the very small revenue at its disposal. They are quite inadequate to meet the cost of maintaining the parks in any decent way. One reads in the Western Morning News, our Plymouth morning paper, about the difficulties of keeping these parks. Hardly a week passes without some reference to them. The work of the park committees is cribbed and confined by the paucity of the finances at their disposal.
9.15 p.m.
There is need for electricity to be taken to the national parks, but equally there is the fear that the beauty of the moorlands will be spoiled by the erection of pylons. The National Land Fund is a source of revenue to help meet excessive expenditure on taking electricity to national park areas without spoiling the parks themselves. Much of the cliff land in Cornwall has been given in small pieces from time to time to the National Trust. Some of the land has been bought out of funds raised locally and by friends of the county, and some has been acquired through the National Land Fund, but from time to time I have had to remind the House of Commons that the National Trust has had to cultivate parts of heath land in order to obtain revenue to maintain the whole. Places of great value in flora have had to be ploughed up by the National Trust, although when they were in the hands of other owners for centuries they were never ploughed. Now that we are achieving greater efficiency in agriculture, there is no need to take over open downs for cultivation as seemed necessary years ago.
There is also the problem of litter on cliffs and parks. People throw cigarette ends, papers and broken bottles on the cliffs and moors, and these places have to be cleaned. They should be cleaned, just as streets in towns are kept clean, but we cannot expect a county council or a small local authority to do that when they have not the financial resources. Paths have also to be kept in a proper state for people to walk on them. Gorse grows over them and makes them impassable very quickly, but slight attention regularly will keep them clear. The cliff paths in Cornwall


extend to 280 miles and provide a great problem in upkeep. Great expenditure is not required, but a certain amount must be spent annually.
The hon. Member for Farnham (Mr. Godfrey Nicholson) said that the National Land Fund should be disposed of and that the House of Commons should consider each proposal for acquisition as it came along, but surely all hon. Members know that that is an impossible idea. We know how impossible it has been in the House of Commons in recent years to get even comparatively small sums of money for the provision of water supplies, sewerage systems and the maintenance of roads in decent condition in our rural areas, to say nothing of the provision of schools. This suggestion by the hon. Member for Farnham is a very bad one, which I hope will not be adopted.
My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) showed great imagination and initiative in establishing the Fund. It gave heart to those of us who had come through two world wars, because we thought that the wars had not been fought in vain. We should do something as a nation to preserve our great heritage, because the time is now passed when that can be preserved by individual effort.
The Bill introduced by the Duke of Norfolk in recent weeks is evidence of that. I hope, therefore, that the Chancellor, even at this late hour, will take courage from what has been said in this Committee, will withdraw the Clause, and will give further consideration to the matter in the coming year.

Mr. M. Philips Price: At this late hour, I will not keep the Committee long in raising one or two points.
If the £50 million in the National Land Fund has not been used, there is something to be said for the point of view of the Financial Secretary in arguing in favour of its reduction. The point which most of us who criticise his suggestion would like to know is why the Fund has not been used? When I saw it was to be reduced from £50 million to £10 million I was shocked. It would not have been such a shock if the suggested reduction was to £30 million or £25 million. We all know that there are

many ways in which the Fund could and should have been used but has not been used.
It is true that the money should not be left to accumulate, as it has to nearly £60 million, outside the immediate control of the House of Commons. In that sense I agree with my hon. Friend the Member for Chesterfield (Mr. Benson), although I regretted the rest of his speech. We must keep some control over the Fund, but it is ridiculous to have to come to the House every time a sum of money is required to be spent in order to preserve an important historical building.

Mr. Ellis Smith: I wish we could control more millions than that.

Mr. Philips Price: That is the object of the scheme of my right hon. Friend in setting up the Fund. There is one reason why some of the money has not been used. I understand that the National Parks Commission has no power to handle the money in the Fund. It has been tried, and those who speak for the National Parks Commission have been asking for that power for a long time, but the request has not been granted. I think I know the reason why. The National Parks Commission was not given that power under the Act of Parliament which set it up in 1947, due, it seems, to an omission on the part of those who sponsored the Bill at that time. This point has only been raised indirectly during the debate but it is a major point.

Mr. Blenkinsop: If my hon. Friend will allow me to interrupt, I referred to it, according to some hon. Gentlemen opposite, at too great a length, in explaining the point, as I thought, clearly.

Mr. Philips Price: Yes, I think my hon. Friend did mention it, as did one or two others, but the point has not been emphasised, and it is extremely important. If it is true that the National Parks Commission is not able to handle the National Land Fund, the sooner that is put right the better. That point must be emphasised. I want to know what the Government will do to put this right, because then they will have no excuse to say that the money has not been spent and that therefore the amount must be reduced.
I agree with my hon. Friends that there is no end to the objects on which the Commission could spend the Fund, for instance, putting electric overhead cables underground, bringing electricity to remote areas, and doing all sorts of things to preserve the beauties of those areas. But there are other sides to the matter. There is the historical side—beautiful old houses and parks have been mentioned—but I do not think any fresh legislation is needed there. It is really a question of getting on with it.
The National Trust is constantly considering offers of valuable historic properties, but it cannot accept them because the owners have not the funds with which to endow them. That is a fact. I know several owners of beautiful historic mansions in the south-west of England who are living in mere corners of their properties now. They realise that times have changed. They are letting the public visit their properties and thereby trying to cover expenses, but they are not all succeeding. In spite of their opening their properties to the public, I shall not be surprised if the owners are unable to carry on, because the expenses are so great.
There is a case for such properties to be handed over to the National Trust with the necessary funds to keep the places going, and I would hope that the families could still have a right to live there. Country people like the old families there; they do not want the old families to have economic privileges as they did in the past, but they would like the connection between the families and the old places to be maintained. Another way in which to use the Fund would be in keeping such fine old places going.
I much regret the use of the unfortunate failure to spend the Fund as an excuse to cut it down to the miserable amount suggested. I think that my hon. Friends and I are entitled to register our protest and our vote.

Mr. Powell: I hope that the Committee will not think me discourteous if I briefly reply now to a debate which has ranged very wide and in which many hon. Members have spoken of a subject in which they are personally and keenly interested.
I have been accused of treating this as purely a dry accounting matter, but the

Clause is concerned with an accounting matter, and, as I explained earlier, only with an accounting matter. The right hon. Member for Bishop Auckland (Mr. Dalton), though perhaps himself in his sunset decade, has not lost his great knowledge of public finance, and when he asked my right hon. Friend what he intended to do with all this money, he knew perfectly well that whenever a sum of money is spent through the National Land Fund what happens is that a new borrowing is made from the public, and the National Debt is pro tanto at that moment increased.
The hon. Member for Stockton-on-Tees (Mr. Chetwynd) said that it did not matter about accountability because, after all, the House of Commons gets the accounts of the Fund; so he asked why we should worry about having Estimates. I do not know what view the House of Commons would take if the Government announced that they had decided to dispense with the procedure of having Estimates because Parliament would, in due course, get the Appropriation Accounts, which could be debated, and that would be sufficient. We must, of course, as far as possible retain the normal Parliamentary forms of control over our expenditure.
9.30 p.m.
The debate has covered both the present purposes to which, under the existing law, the National Land Fund can be devoted, and has included a number of suggestions for further purposes to which, if the necessary legislation were passed, it could be devoted. It is easy to underestimate the amount which is being done under present powers through the Fund. The expenditure through the Fund in the last financial year alone amounted to about £1 million.
The Committee may be interested to note that 26 properties have been acquired and transferred to the National Trust, six to the English and Scottish Youth Hostels Associations, six to the Forestry Commission and one or two to other Government Departments which can preserve their amenities for the nation. In addition, there have been the important collections of works of art at Petworth and Ickworth, recently acquired and placed in the custody of the National Trust. Several other transfers, including some very important ones, are pending.
The properties transferred in this way to the National Trust have ranged from about 46,000 acres of the Penrhyn Estate, in Snowdonia, to the Claremont Estate, at Esher, a fine example of eighteenth century English landscape gardening. The National Trust is, in this way, co-operating in a very admirable manner with the public in the preservation of this part of our heritage. It would be a mistake to suppose that anything which is being done in this Clause in any way inhibits the policies of which I have been describing the effect, or is any derogation of the work of the National Land Fund.
Reference was made to the work of the corresponding Fund in Northern Ireland, but it is worth noticing that despite the payments made through that Fund, its amount to date is practically the same as when it was first established, in 1948.

Mr. Dalton: That is because it invested in longer term securities at a higher rate of interest, because its payments out have been one third of its capital.

Mr. Powell: The right hon. Gentleman has exaggerated the extent of the payments out to date, but, obviously, the addition of interest—

Mr. Dalton: I am quoting what Lord Antrim said in an article in The Times on 7th June, when he gave figures.

Mr. Powell: The right hon. Gentleman has added an item of payment which has not yet been made in arriving at his pro-

portion. No doubt the addition of interest to the Fund in Ireland, as in this country, has been responsible for its present size.

Further potential purposes, expenditure on which might be made in this way, by borrowing rather than through revenue, have been mentioned during the debate, notably purposes connected with the national parks.

It would, of course, be necessary for Parliament to legislate for that, and if and when Parliament legislates to that effect, then will be the time for Parliament to make the appropriate financial provision in this or some other way. But nothing which we are doing now will inhibit Parliament in so legislating, if it is desired, just as nothing which is now being done in any way inhibits the pursuit of present policies under the existing law, or implies that they are in any way to be altered.

Once again, and for the last time, I say to the Committee that we are merely making an accounting change which will comply with the general requirements of the House of Commons of ensuring that from time to time the Government have to come to Parliament for a renewal of their authority to meet this kind of expenditure by borrowing.

Mr. Dalton: In view of the most unsatisfactory, unhelpful, unimaginative and pedantic reply, we shall divide against the Clause.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 240, Noes 198.

Division No. 157.]
AYES
[934 p.m.


Agnew, Sir Peter
Boyle, Sir Edward
Danoe, J. C. G.


Aitken, W. T.
Braithwaite, Sir Albert (Harrow, W.)
Davidson, Viscountess


Alport, C. J. M.
Brooke, Rt. Hon. Henry
D'Avigdor-Goldsmid, Sir Henry


Amery, Julian (Preston, N.)
Brooman-White, R. C.
Deedes, W. F.


Amory, Rt. Hn. Heathcoat (Tiverton)
Browne, J. Nixon (Craigton)
Digby, Simon Wingfield


Arbuthnot, John
Bryan, P.
Doughty, C. J. A.


Armstrong, C. W.
Bullus, Wing Commander E. E.
Drayson, C. B.


Ashton, H.
Burden, F. F. A.
du Cann, E. D. L.


Atkins, H. E.
Butcher, Sir Herbert
Dugdale, Rt. Hn. Sir T. (Richmond)


Baldwin, A. E.
Butler.Rt.Hn.R.A.(Saffron Walden)
Eden, J. B. (Bournemouth, West)


Barber, Anthony
Cary, Sir Robert
Elliot, Rt. Hon. W. E. (Kelvingrove)


Barlow, Sir John
Channon, Sir Henry
Elliott,R.W.(N'oastle upon Tyne.N.)


Barter, John
Chichester-Clark, R.
Errington, Sir Eric


Beamish, Maj. Tufton
Clarke, Brig. Terence (Portsmth, W.)
Erroll, F. J.


Bell, Philip (Bolton, E.)
Cole, Norman
Fell, A.


Bell, Ronald (Bucks, S.)
Conant, Maj Sir Roger
Finlay, Graeme


Bevins, J. R. (Toxteth)
Cooke, Robert
Fisher, Nigel


Birch, Rt. Hon. Nigel
Cordeaux, Lt.-Col. J. K.
Fletcher-Cooke, C.


Bishop, F. P.
Corfield, Capt. F. V.
Fort, R.


Black, C. W.
Craddock, Beresford (Spelthorne)
Foster, John


Body, R. F.
Crosthwaite-Eyre, Col- O. E.
Fraser, Hon, Hugh (Stone)


Bossom, Sir Alfred
Crowder, Sir John (Finchley)
Galbraith, Hon. T. G. D.


Bowen, E. R. (Cardigan)
Cunningham, Knox
Gammans, Lady


Boyd-Carpenter, Rt. Hon. J. A.
Currie, G. B. H.
Garner-Evans, E. H.




George, J. C. (Pollok)
Lancaster, Col. C. G.
Prior-Palmer, Brig. O. L.


Gibson-Watt, D.
Langford-Holt, J. A.
Profumo, J. D.


Glover, D.
Leavey, J. A.
Raikes, Sir Victor


Godber, J. B.
Leburn, W. G.
Ramsden, J. E.


Gomme-Duncan, Col. Sir Alan
Legge-Bourke, Maj. E. A. H.
Rawlinson, Peter


Goodhart, Philip
Legh, Hon. Peter (Petersfield)
Redmayne, M.


Gough, C. F. H.
Lindsay, Hon. James (Devon, N.)
Remnant, Hon. P.


Gower, H. R.
Lindsay, Martin (Solihull)
Ridsdale, J. E.


Graham, Sir Fergus
Linstead, Sir H. N.
Rippon, A. G. F.


Grant, W. (Woodside)
Lloyd, Maj. Sir Guy (Renfrew, E.)
Robertson, Sir David


Green, A.
Low, Rt. Hon. A. R. W.
Robinson, Sir Roland (Blackpool, S.)


Gresham Cooke, R.
Lucas, P. B. (Brentford &amp; Chiswick)
Robson Brown, Sir William


Grimond, J.
Lucas-Tooth, Sir Hugh
Rodgers, John (Sevenoaks)


Grimston, Hon. John (St. Albans)
Macdonald, Sir Peter
Roper, Sir Harold


Grimston, Sir Robert (Westbury)
Mackeson, Brig. Sir Harry
Ropner, Col. Sir Leonard


Crosvenor, Lt.-Col. R. G.
McKibbin, A. J.
Schofield, Lt.-Col. W.


Gurden, Harold
Mackie, J. H. (Galloway)
Scott-Miller, Cmdr. R.


Hall, John (Wycombe)
McLaughlin, Mrs. P.
Sharples, R. C.


Harris, Frederic (Croydon, N.W.)
Maclay, Rt. Hon. John
Shepherd, William


Harris, Reader (Heston)
Maclean, Sir Fitzroy (Lancaster)
Smithers, Peter (Winchester)


Harrison, Col. J. H. (Eye)
Macleod, Rt. Hn. Iain (Enfield, W.)
Smyth, Brig. Sir John (Norwood)


Harvey, Sir Arthur Vere (Macclesfd)
Macmillan, Rt. Hn. Harold(Bromley)
Spearman, Sir Alexander


Harvey, Ian (Harrow, E.)
Macpherson, Niall (Dumfries)
Speir, R. M.


Harvey, John (Walthamstow, E.)
Maitland, Hon. Patrick (Lanark)
Spens, Rt. Hn. Sir P.(Kens'gt'n, S.)


Heath, Rt. Hon. E. R. G.
Manningham-Buller, Rt. Hon. Sir R.
Stevens, Geoffrey


Henderson, John (Cathcart)
Markham, Major sir Frank
Steward, Harold (Stockport, S.)


Henderson-Stewart, Sir James
Marlowe, A. A. H.
Steward, Sir William(Woolwich, W.)


Hicks-Beach, Maj. W. W.
Marples, Rt. Hon. A. E.
Stuart, Rt. Hon. James (Moray)


Holland-Martin, C. J.
Marshall, Douglas
Studholme, Sir Henry


Holt, A. F.
Mawby, R. L.
Sumner, W. D. M. (Orpington)


Hornby, R. P.
Maydon, Lt.-Comdr. S. L. C
Taylor, Sir Charles (Eastbourne)


Hornsby-Smith, Miss M. P.
Medlicott, Sir Frank
Taylor, William (Bradford, N.)


Horobin, Sir Ian
Milligan, Rt. Hon. W. R.
Teeling, W.


Horsbrugh, Rt. Hon. Dame Florence
Molson, Rt. Hon. Hugh
Temple, John M.


Howard, Hon. Greville (St. Ives)
Moore, Sir Thomas
Thomas, Leslie (Canterbury)


Howard, John (Test)
Mott-Radclyffe, Sir Charles
Thompson, Kenneth (Walton)


Hudson, W. R. A. (Hull, N.)
Nabarro, G. D. N.
Thorneycroft, Rt. Hon. P.


Hughes Hallett, Vice-Admiral J.
Neave, Airey
Thornton-Kemsley, C. N.


Hughes-Young, M. H. C.
Nicholls, Harmar
Tiley, A. (Bradford, W.)


Hutchison, Michael Clark (E'b'gh,S.)
Nicholson, Godfrey (Farnham)
Tilney, John (Wavertree)


Hylton-Foster, Rt. Hon. Sir Harry
Nicolson, N.(B'n'm'th.E. &amp; Chr'ch)
Turton, Rt. Hon. R. H.


Iremonger, T. L.
Nugent, G. R. H.
Vane, W. M. F.


Irvine, Bryant Godman (Rye)
Oakshott, H. D.
Vaughan-Morgan, J. K.


Jenkins, Robert (Dulwich)
Orr, Capt. L. P. S.
Vickers, Miss Joan


Jennings, J. C. (Burton)
Orr-Ewing, Charles Ian (Hendon, N.)
Walker-Smith, Rt. Hon. Derek


Jennings, Sir Roland (Hallam)
Osborne, C.
Wall, Major Patrick


Johnson, Dr. Donald (Carlisle)
Page, R. G.
Ward, Dame Irene (Tynemouth)


Johnson, Eric (Blackley)
Pannell, N. A. (Kirkdale)
Whitelaw, W. S. I.


Joseph, Sir Keith
Peyton, J. W. W.
Williams, Paul (Sunderland, S.)


Joynson-Hicks, Hon. Sir Lancelot
Pickthorn, K. W. M.
Williams, R. Dudley (Exeter)


Kaberry, D.
Pike, Miss Mervyn
Wills, G. (Bridgwater)


Kerby, Capt. H. B.
Pilkington, Capt. R. A.
Wood, Hon. R.


Kerr, Sir Hamilton
Pitt, Miss E. M.
Woollam, John Victor


Kershaw, J. A.
Pott, H. P.
Yates, William (The Wrekin)


Kimball, M.
Powell, J. Enoch
TELLERS FOR THE AYES:


Kirk, P. M.
Price, David (Eastleigh)
Mr. Richard Thompson and Mr. Edward Wakefield.


Lagden, G. W.
Price, Henry (Lewisham, W.)





NOES


Ainsley, J. W.
Burke, W. A.
Dodds, N. N.


Allen, Arthur (Bosworth)
Butler, Herbert (Hackney, C.)
Donnelly, D. L.


Allen, scholefield (Crewe)
Callaghan, L. J.
Dugdale, Rt. Hn. John (W. Brmwch)


Awbery, S. S.
Carmichael, J.
Ede, Rt. Hon. J. C.


Bacon, Miss Alice
Champion, A. J.
Edelman, M.


Baird, J.
Chapman, W. D.
Edwards, Rt. Hon. Ness (Caerphilly)


Bellenger, Rt. Hon. F. J.
Chetwynd, G. R.
Edwards, Robert (Bilston)


Bence, C. R. (Dunbartonshire, E.)
Clunie, J.
Edwards, W. J. (Stepney)


Benn, Hn. Wedgwood (Bristol, S.E.)
Coldrick, W.
Evans, Albert (Islington, S.W.)


Beswick, Frank
Collick, P. H. (Birkenhead)
Fienburgh, W.


Blackburn, F.
Collins, V. J.(Shoreditch &amp; Finsbury)
Fletcher, Eric


Blenkinsop, A,
Corbet, Mrs. Freda
Forman, J. C.


Blyton, W, R.
Cove, W. G.
Fraser, Thomas (Hamilton)


Boardman, H.
Craddock, George (Bradford, S.)
Gibson, C. W.


Bottomley, Rt. Hon. A. G.
Cronin, J. D.
Greenwood, Anthony


Bowden, H. W. (Leicester, S.W.)
Crossman, R. H. S.
Grenfell, Rt. Hon. D. R.


Bowies, F. G.
Cullen, Mrs. A.
Grey, C. F.


Boyd, T. C.
Dalton, Rt. Hon. H.
Griffiths, William (Exchange)


Braddock, Mrs. Elizabeth
Davies, Ernest (Enfield, E.)
Hale, Leslie


Brookway, A. F.
Davies, Harold (Leek)
Hall, Rt. Hn. Glenvil (Colne Valley)


Broughton, Dr. A. D. D.
Davies, Stephen (Merthyr)
Hamilton, W. W.


Brown, Rt. Hon. George (Belper)
Deer, G.
Hannan, W.


Brown, Thomas (Ince)
Delargy, H. J.
Harrison, J. (Nottingham. N.)







Hastings, S.
Mallalieu, E. L. (Brigg)
Rogers, George (Kensington, N.)


Hayman, F. H.
Mann, Mrs. Jean
Ross, William


Healey, Denis
Marquand, Rt. Hon. H. A.
Royle, C.


Henderson, Rt. Hn. A. (Rwly Regis)
Mason, Roy
Short, E. W.


Hewitson, Capt. M.
Mayhew, C. P.
Shurmer, P. L. E.


Hobson, C. R. (Keighley)
Mellish, R. J.
Silverman, Julius (Aston)


Holmes, Horace
Messer, Sir F.
Silverman, Sydney (Nelson)


Houghton, Douglas
Mikardo, Ian
Simon, J. E. S.(Middlesbrough, W.)


Howell, Charles (Perry Barr)
Mitchison, G. R
Skeffington, A. M.


Hughes, Emrys (S. Ayrshire)
Monslow, w.
Slater, J. (Sedgefield)


Hughes, Hector (Aberdeen, N.)
Moody, A. S.
Smith, Ellis (Stoke, S.)


Hunter, A. E.
Morris, Percy (Swansea, W.)
Soskice, Rt. Hon. Sir Frank


Hynd, J. B. (Attercliffe)
Morrison, Rt.Hn.Herbert(Lewis'm,S.)
Sparks, J. A.


Irvine, A. J. (Edge Hill)
Mort, D. L.
Stewart, Michael (Fulham)


Irving, Sydney (Dartford)
Mulley, F. W.
Stones, W. (Consett)


Isaacs, Rt. Hon. G. A.
Noel-Baker, Rt. Hn. P. (Derby, S.)
Summerskill, Rt. Hon. E.


Janner, B.
O'Brien, Sir Thomas
Swingler, S. T.


Jay, Rt. Hon. D. P. T.
Oliver, G. H.
Sylvester, G. O.


Jeger, George (Goole)
Oram, A. E.
Taylor, Bernard (Mansfield)


Jeger,Mrs.Lena(Holbn &amp; St.Pncs.S.)
Oswald, T.
Taylor, John (West Lothian)


Jenkins, Roy (Stechford)
Owen, W. J.
Thomas, Iorwerth (Rhondda, W.)


Johnson, James (Rugby)
Padley, W. E.
Tomney, F.


Jones, Rt. Hon.A. Creech(Wakefield)
Paget, R, T.
Ungoed-Thomas, Sir Lynn


Jones, Elwyn (W. Ham, S.)
Paling, Rt. Hon. W. (Dearne Valley)
Viant, S. P.


Jones, J. Idwal (Wrexham)
Palmer, A. M. F.
Warbey, W. N.


Jones, T. W. (Merioneth)
Pannell, Charles (Leeds, W.)
Watkins, T. E.


Kenyon, C.
Pargiter, G. A.
Wells, Percy (Faversham)


Key, Rt. Hon. C. W.
Parker, J.
Wells, William (Walsall, N.)


King, Dr. H. M.
Peart, T. F.
Wheeldon, W. E.


Lawson, G. M.
Pentland, N.
White, Henry (Derbyshire, N.E.)


Ledger, R. J.
Popplewell, E.
Wilcock, Group Capt. C. A. B.


Lee, Frederick (Newton)
Prentice, R. E.
Wilkins, W. A.


Lee, Miss Jennie (Cannock)
Price, J. T. (Westhoughton)
Willey, Frederick


Lever, Harold (Cheetham)
Price, Philips (Gloucestershire, W.)
Williams, Rev. Llywelyn (Ab'tillery)


Lindgren, G. S.
Probert, A. R.
Williams, Rt. Hon. T. (Don Valley)


Lipton, Marcus
Proctor, W. T.
Williams, W. R. (Openshaw)


Logan, D. G.
Randall, H. E.
Willis, Eustace (Edinburgh, E.)


Mabon, Dr. J. Dickson
Rankin, John
Wilson, Rt. Hon. Harold (Huyton)


MacColl, J. E.
Redhead, E. C.
Woodburn, Rt. Hon, A.


McGovern, J.
Reeves, J.
Woof, R. E.


McInnes, J.
Rhodes, H.
Yates, V. (Ladywood)


McKay, John (Wallsend)
Robens, Rt. Hon. A.
Younger, Rt. Hon. K.


MacPherson, Malcolm (Stirling)
Roberts, Goronwy (Caernarvon)



Mahon, Simon
Robinson, Kenneth (St. Pancras, N.)
TELLERS FOR THE NOES:




Mr. Pearson and Mr. Simmons

Clause ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.

New Clause.—(MARRIED WOMAN'S EARNED INCOME.)

The first two hundred and fifty pounds of a married woman's earned income shall be excluded from the computation of the total joint income for purposes of surtax.—[Brigadier Prior-Palmer.]

Brought up, and read the First time.

Brigadier O. L. Prior-Palmer: I beg to move, That the Clause be read a second time.
The history of this matter dates back to 1799, when at that time it was a convenient method of collecting taxes. It was also the time when married women had no personal rights at all and it was not the custom for women to go out to work. They were then, as they are still, classed for Income Tax or tax purposes with lunatics and imbeciles. I suggest that those days are long past and that this

attitude to married women for taxation purposes is archaic and out of date.
9.45 p.m.
It is desirable, as has been said on both sides of the Committee, that in these days women, where possible, should be encouraged to go out to work. The Royal Commission on Taxation came down against the abolition of aggregation of income in so far as it affected Income Tax. I read that Report very carefully to find anything relating to Surtax. The only thing I could find, although it is not exactly in line with what I have to say, was the suggestion that in order to iron out the kink in the curve of tax liability which occurs where a man on reaching just over the Surtax level loses all his earned Income Tax relief, on earnings about that level and to assist married couples, both of whom are earning, the earned income allowance should be raised to figures at varying rates between £4,000 and £5,000. That is where the lower limit of Surtax and the upper earned income relief operate.
There is no doubt whatever that the Government, and particularly this Government, have been urging women to take up science and to train as scientists. As a result of the remarks that I made in the Budget debate, I was taken up on one point, as is often the case, by the Press when I said in passing and rather flippantly that this aggregation of income was encouraging people to live together and not get married. This got wide publicity, and I received letters from all over the country from married women of ability and qualifications who said that they were not working in order that they should not aggregate their income so that it came into the Surtax group.
One case was of a woman scientist, who had very high honours degrees in science, whose greatest joy in life was experimenting and working in scientific laboratories, and who now that she is married is not permitted by her husband to carry on with her work. I consider this a very serious state of affairs. I do not lay very great stress on the other aspect of this in which people say that because of the high taxation on those in that particular income bracket there is a great deal of emigration, but I say that it is discouraging these able women who are capable of earning high incomes from so doing, and that is all to the bad.
I do not suggest that any very large concession should be made. I am not suggesting that we should go so far as recommended in the Royal Commission's Report, but I do suggest that, as it is at the moment, where very large concessions are given to the lower income groups in order to encourage women to go out to work, similar treatment should be given to those in the higher income groups as well.

Mr. Houghton: We could not support the proposed new Clause. The hon. and gallant Member for Worthing (Brigadier Prior-Palmer) has gone back in history to the time when married women had no rights at all; but our taxation system has for some time recognised the special position of married women's earnings.
There may be an argument whether married women's earnings are favourably or unfavourably treated for Income Tax purposes. The hon. and gallant Gentleman referred to that portion of the Second Report of the Radcliffe Commission on Taxation, which discussed some

of the features of the present system and the exemptions and anomalies that some people allege exist between the taxation of married couples where the wife is earning, and the taxation of married couples where the wife has to stay at home and look after the children.
The proposed new Clause relates to Surtax and not to Income Tax. There may be a case for an adjustment of taxation on married women's earnings, but we should not think of beginning at the Surtax level. Examination of this problem should take place as a whole and not be confined to the Chancellor's very liberal concessions to Surtax payers in the Bill. I suppose that the hon. and gallant Gentleman could have raised this matter on Clause 12, which deals with
Allowance of personal reliefs for purposes of Surtax.
As the hon. and gallant Gentleman knows, the Chancellor is, for the first time, allowing in this Bill personal reliefs over a certain minimum sum to be set off against Surtax liability. A married man, for example, now has an exemption limit of £2,100 as against £2,000 previously. I do not think the Committee would wish to support a new Clause which would exclude the first £250 of a married woman's income for Surtax purposes.
It may be time that we looked at the whole question of taxation of married persons. There is a lot of loose talk about its paying people better to live in sin than to get married, but I do not think that people order their lives in intimate matters of that kind solely by reference to the advantages or disadvantages of taxation. Most women would, I think, wish to feel the security of marriage rather than that a concession might be obtained through Income Tax or Surtax arrangements.
It will be no surprise to the hon. and gallant Gentleman or to the Minister that we think that Surtax reliefs have gone far enongh in the Bill, for the time being at least. In those circumstances, we shall not be able to lend the hon. and gallant Gentleman any support.

Mrs. Lena Jeger: I oppose the proposed new Clause, for reasons not exactly those which have motivated my hon. Friend the Member for Sowerby (Mr. Houghton).


My main reason is that the proposal does not go far enough.
We have to consider the whole principle on which married women's earnings are taxed. The only way to put the matter right is for us to start with the basic flaw in our Income Tax law "that a woman's income shall be deemed to be that of her husband." That is the basic injustice which must be put right, and anything which is short of that is a waste of time.
The need is not for this new Clause, but for a Clause which will alter the law and abolish the principle of aggregation altogether. Where a husband and wife are both working, there is no reason why there should be a weighted allowance for the man. The only sensible way to deal with the question, when the husband and wife are both working, is for each to be assessed separately throughout their whole income and for the point never to be reached, as it is reached at present, where aggregation takes effect.
To give an example of the confusion which exists in the taxation of married couples I should like to refer to a Question which I asked on 15th March, 1955, and which is reported to column 109 of the OFFICIAL REPORT. It reveals that where a wife earns £900 and her husband earns £450, making a total of £1,350, the Income Tax payable is £206; but where the man earns £900 and the woman earns £450, giving the same total of £1,350, the tax is £188.
I cannot see why there should be this difference in the amount of tax paid on identical joint incomes. Nor can I see why the husband and wife should necessarily be regarded as a single tax unit. In France, there is a system by which the whole family income is aggregated and then divided. Why should a husband and wife be automatically considered as a single tax unit, and not two brothers or two sisters who happen to live together, or two other people living together in the circumstances referred to by the hon. and gallant Member for Worthing (Brigadier Prior-Palmer)? We are completely out of date in this respect and need a fresh approach to the whole problem.
Another reason why I hope the Committee will in future look into the present system is that it seems to me to be an overhang from the days when the position of women was even more inferior than

it is today. It makes a mockery of the battle for equal pay, to which both sides have paid lip service, if, after the principle of equal pay has been accepted and has been put into practice, the Chancellor of the Exchequer does his best, through an out of date and discriminatory tax system, to see that that equality of pay is completely undermined in the case of a married woman by the system of aggregation for tax purposes.
It may seem unusual for a member of the Labour Party to be bothered about the incomes of Surtax payers, especially when we have a Chancellor of the Exchequer who looks after them so tenderly. Indeed, that is not my reason for raising this matter tonight. I raise it because it seems to me a basic part of the social injustice to women who are working, often extremely hard.
There are good precedents in other parts of the Commonwealth for a change in the law. In Canada and Australia, there is no aggregation; there is a single tax assessment for married women. In the United States, there is a system which gives a woman at least a choice of a separate assessment, although I do not want to go into too many of the complications tonight. The Royal Commission's Report, to which both the hon. and gallant Member and my hon. Friend the Member for Sowerby referred, is extremely unconvincing in the way in which it deals with this subject. In the first place, the Commission refused to receive any oral evidence on the question of married women's earnings.
The Commission came to the following conclusion, in paragraph 131 of its Second Report
We have come to the conclusion that we ought not to recommend the abandonment of the present system, because we think that some of the arguments that support it are too strong not to be acceded to.
That really is a most confused and feeble recommendation to have been made, to say nothing of what Sir Ernest Gowers must think of the deplorable English.
What sort of people are concerned in this question? There are 80,000 working wives in this country who are today paying Surtax on the whole of their income. The Chancellor of the Exchequer has told us that it would cost about £41½ million to abolish the system of aggregation


which brings this about. Among those 80,000 women there are many highly trained, skilled professional workers whose services are desperately needed by the community.
10.0 p.m.
I was interested to hear the hon. and gallant Member for Worthing refer to some of the correspondence he has received. I should like to mention a letter which came to me, after our last debate on the subject, from a distinguished woman doctor, who holds a doctorate of medicine and who is one of the few women to be a Fellow of the Royal College of Surgeons. She is married to a doctor, and in her letter she says:
I work full time in a hard and responsible job, virtually for a few hundred pounds a year. I could, of course, give up work. The fact that I am working not only involves an enormous taxation burden but makes the running of our doctor's house—at no time an easy matter—even more difficult and expensive.
The case of doctors is one to which the Committee should be particularly sympathetic, and this point of view is supported by the Medical Women's Association.
One can take the matter further. If a doctor marries a nurse, as often happens, and quite rightly, and if that doctor is a busy practitioner with a full list, and then, just to meet some emergency or shortage of staff in a local hospital, his wife goes back to work for a few weeks, she, as a nurse, will be paying Surtax on the whole of her income. I cannot think that it was ever the intention of those who framed our tax laws that women who are doing a good, professional job should be penalised in this way.
We must all know of cases of people who are not by any means wealthy, but who, by virtue of long training and the responsibility of their posts, are earning salaries which bring them within the Surtax level, as taxation is arranged at present. I know of a doctor who is married to a headmaster, and of a psychiatric social worker who is married to a physicist, who find themselves having to pay Surtax on the whole of their incomes.
It is in the field of social services that we are very short of workers, and this discouragement is, I submit to the Committee, most deleterious. In many of the

professions, such as nursing and social work, there is not a shortage of entrants but a tremendous loss through marriage, and this, I am sure, could be partly offset if there were a fairer tax basis.
For those reasons, I regret that the new Clause is not one which I could feel able to support. I am opposing it because it does nothing to right the basic principle of discrimination against the income of a married woman, which I feel must be the starting point of any reform in this direction.

Brigadier Prior-Palmer: The reason that I did not embrace the whole Income tax group arose from an Answer to a Question posed by the hon. Lady the Member for Flint. East (Mrs. White) to the Chancellor this year, when she asked how much it would cost to do that. The reply was that both parties to the marriage would lose by it and the Exchequer would gain £75 million. That is why I did not bring it down to Income Tax; they would lose so much by it that it would not pay them.

Mrs. Jeger: In column 176 of the OFFICIAL REPORT for 16th April this year, the Chancellor of the Exchequer is reported as informing me that the abolition of aggregation would cost £4½ million if applied to the earnings of married women.

Sir Charles Mott-Radclyffe: I do not often agree with what the hon. Lady the Member for Holborn and St. Pancras, South (Mrs. L. Jeger) says, but this evening there is a great deal of force in her argument. She has really hit the nail on the head. If we wish to encourage women to embark upon the teaching profession, the medical profession and various branches of science and to earn the high salaries which they can command in those professions, it seems absurd that once a woman gets married somebody earning a high salary in another profession should attract a double rate of tax. That is an absurd disincentive.
The hon. Lady put the argument very well. She said that the new Clause does not go far enough, and I agree with her. On the basis, however, that a half a loaf is better than no bread, I hope that my right hon. Friend the Chancellor of the Exchequer will go at least some way and meet us by accepting the principle of the new Clause.

Miss Jennie Lee: I hope that before we have another Budget we shall have a Chancellor of the Exchequer who really examines the fundamentals behind the principle that we are discussing. We are taking it very lightly tonight. The right hon. Gentleman cannot expect to get us on this side seriously excited with the limited issue of Surtax which has been raised. We must, however, remember that many thousands of young women are being trained in our universities, most of them at public expense.
When the Chancellor is calculating how much he will gain or lose, he must also consider that every inducement should be given to the trained professional woman who wishes to do so to go on doing the job which she has been trained to do.
We on this side do not like the kind of situation in which a married woman, particularly with young children, is forced out to work through sheer economic necessity. We believe that a good society is one which gives the maximum diversity in the way we live, that there should be no dictation and, particularly, that the modern woman should not be sermonised and dictated to. It is for her to decide and for her husband and family with her to determine what is a good life for them. It should be remembered that if a woman who goes out to work is keeping a fair standard of home or has children, she has very often to pay to maintain the standard of the home by engaging, if not whole-time, part-time services of somebody to help her.
While I cannot support the new Clause in its entirety, I hope that before we have another Budget we shall examine the basic principle of aggregation and recognise that in the modern world a woman should have the choice of whether she goes out to work and that it is her private concern and not a State matter, but that it is a State matter to ensure that taxation is not weighted in such a way that we discourage women who have been expensively trained, often at public expense, from continuing to work after they marry.

The Economic Secretary to the Treasury (Mr. Nigel Birch): Both my hon. and gallant Friend the Member for Worthing (Brigadier Prior-Palmer) and

the two hon. Ladies—the hon. Member for Holborn and St. Pancras, South (Mrs. L. Jeger) and the hon. Member for Cannock (Miss Lee)—have put the case persuasively, and I should like to answer it. This concession would cost £3¼ million, which is of course an item, but is not in itself a complete answer to the proposal. There are, however, two slightly different points arising from the speeches which have been made.
There is, first, the argument concerning aggregation and whether the income of the husband and wife should be aggregated; and secondly, the question whether the wife's earnings should to any extent rank as a relief against Surtax. As my hon. and gallant Friend the Member for Worthing quite rightly said, this has been in our tax law since 1799—a quite respectable precedent; but there have been too slight dints in it in recent years which are worth recording. There was the special wife's earned income relief of seven-ninths up to £140, and married women's earnings are charged for Income Tax at reduced rates. So there has been very slight dents in that principle. Those dents do not make any difference in Surtax.
The Royal Commission, considering this matter, thought that those slight dents in that principle, if the wife was earning, favoured the married couple too much compared with the couple of whom only the man was earning. The Royal Commission took the view that it was rather too much.
Those who pay Surtax, of both sexes, obviously do not like aggregation very much because it costs a great deal more in tax. The two hon. Ladies and my hon. and gallant Friend said it was a terrible thing that a wife should pay Surtax on the whole of her income. However, unless a couple apply to be assessed separately, it is the husband who is responsible for paying Surtax. I would here say a word for oppressed husbands, for we have heard a great deal about oppressed wives. Experience as I have heard of it shows that wives in general take the view that they do not hold with Surtax, and that a wife will spend whatever net income she gets, and it is the husband who is responsible for paying the Surtax.
I thought many of the arguments were really directed to the view that Surtax is too high anyway, and that it


discourages both the married woman and her husband from working, rather than arguments against aggregation in itself. The Royal Commission considered this question of aggregation and reported on it at very considerable length in paragraphs 113 to 121 of its Report. It received a very large number of representations on the subject. After carefully considering the matter, it came down in the end in favour of maintaining the principle of aggregation.
It did that for two main reasons. There was a lot of minor reasons, but there were two main reasons. One was that it was extremely expensive in Surtax—it is only in the Surtax range that it becomes expensive—and that if it was expensive some other tax would have to be raised instead. The second was that it was fairer to do it in this way because this principle of separate assessment would make loopholes for evasion. What happens in America, I believe, is that the incomes of a wife and of a husband tend, curiously enough, to be exactly the same, and that, of course, has the very fortunate effect of reducing liability to taxation. That, of course, is what is bound to happen if we abolish the principle of aggregation. Ii means a decrease in Surtax paid, and in so far as there is less tax revenue from Surtax we may have to get it out of something else.
My hon. and gallant Friend was quite right in saying that the Royal Commission made a qualified suggestion under which a wife's earnings would have been of some benefit in Surtax relief, but under the provisions of this Budget a married couple are considerably better off than they would have been under the suggestion of the Royal Commission. In addition—and this is important—as my hon. and gallant Friend will remember, the excess of the married man's personal allowance over the single man's personal allowance is also allowed to run for Surtax, and that is assessed against the joint income of husband and wife.
So I would say that while anyone who is a Surtax payer must have great sympathy with the idea that aggregation is a very unpleasant business, and that although we all want to encourage women to take their full part, particularly in professional life, we believe that the Chancellor has gone as far in this Budget as

circumstances permit him to go. The future is open and we hope that other things, other reliefs, and other benefits may happen, but I would point out to my hon. and gallant Friend that my right hon. Friend at this moment cannot go any further. Therefore, I would ask him to withdraw the Motion.

10.15 p.m.

Mr. Harold Wilson: I will not detain the Committee by arguing the merits of either this narrow new Clause or of the wider Amendment which is not on the Order Paper for reasons we all know, but which has excited the interest of two of my hon. Friends. I think that most of us would agree that, being confined to Surtax, this proposal makes a most unsatisfactory way of approaching the problem. I find myself in agreement with my hon. Friend the Member for Sowerby (Mr. Houghton) on the broader issue and, of course, the whole subject has been considered at very considerable length by the Royal Commission, as the Economic Secretary has reminded the Committee.
I was not sure whether, in his concluding words, appealing for withdrawal of the Motion, the Economic Secretary meant that if the Chancellor in a subsequent year, if he is still in office, felt able to give more tax reliefs this would be considered by him. We thought that the present Government were in agreement with the Royal Commission. However, I join with the right hon. Gentleman in suggesting that the Committee should not be pressed into coming to a final decision on this very broad subject tonight, particularly since the debate is on this narrow new Clause.
I join in that suggestion all the more—and this is a very pertinent reason, indeed —because this debate on the whole question of the taxation of earnings of married women is being carried out without the assistance of any hon. Lady opposite. Until the hon. Lady the Member for Devonport (Miss Vickers) came in at a very late stage, this debate on the taxation of married women has been carried on entirely without a single hon. Lady of the Conservative Party being present. What conclusion the women voters in the country will draw from that fact I can only leave—

Sir Henry Studholme: May I point out that my hon. Friend the Member for Hornsey (Lady Gammans) has been here all the time?

The Temporary Chairman (Sir Norman Hulbert): The hon. Lady the Member for Hornsey (Lady Garmnans) is not within the Committee.

Mr. Wilson: I thought it worth while to mention the point, because I thought that, tied up with the argument put for- ward by the Economic Secretary, it might weigh with the hon. and gallant Member for Worthing (Brigadier Prior-Palmer) in either withdrawing or pressing his Motion.

Brigadier Prior-Palmer: I believe that this is the first time that this subject has been raised in a debate on the Finance Bill and I thought it high time that it received an airing. I shall certainly return to the question in the future and I hope that we shall be able to make a further dent in the tax law on this subject, whether on the basis pleaded by the hon. Lady the Member for Holborn and St. Pancras, South (Mrs. L. Jeger) or on mine. I explained why I confined the matter to a narrow point. It was because I thought that by doing so we should get a very small foot in the door in relation to the principle.
However, in view of the explanation given by my right hon. Friend the Economic Secretary, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(EASTER OFFERINGS TO BE EXEMPT FROM INCOME TAX.)

Easter offerings made to clergymen or other ministers of religion shall not be regarded as income for any of the Income Tax Acts for any future year of assessment.—[Mr. D. Marshall.]

Brought up, and read the First time.

Mr. Douglas Marshall: I beg to move, That the Clause be read a Second time.
I do not think that the argument in favour of the Clause is completely unknown to a great number of hon. Members. On many occasions the Clause has been described as a hardy annual. The argument I want to put before the Chancellor of the Exchequer is a good one,

although I will not profess that, looked at purely as an audit argument, it would appear to be a good one. Without overstating the case, however, there is a balanced argument whichever way one reasons on this Clause.
No doubt the Chancellor will readily remember the discussion that took place in the House of Commons in the early hours of the morning in 1946. After an all-night sitting it started about 7.15 a.m. and a Division was called about 9.15 a.m. As was customary then, my right hon. Friend who is now Prime Minister, who was very assiduous in his duties and stayed up through the long night, advanced a powerful argument on behalf of a similar type of Clause, with the exception that there was a limit of £50 to the amount which it was sought to exempt from tax.
It so happened that an hon. Gentleman opposite, no longer a Member of the House of Commons, argued in a reverse manner, although previously, in 1943, he had voted for a similar Clause, and the Prime Minister of the day said:
… whether it is the road to Damascus or the road to promotion, I do not know."—[OFFICIAL REPORT, 24th June, 1946; Vol. 424, c. 992.]
The argument which the Prime Minister used on that occasion is one of the best that can be used in support of this Clause—

Mr. H. Wilson: Could the hon. Gentleman disentangle his Prime Ministers? We are getting confused. He referred to the argument used by the Prime Minister of the day. Was it the Prime Minister of this day, speaking on that occasion?

Mr. Marshall: I am sorry if I have confused the right hon. Gentleman. Each time I mentioned the Prime Minister, I meant the present Prime Minister.
The right hon. Gentleman and hon. Gentlemen opposite are aware that for sixty years Easter offerings did not attract tax. When different cases went through the courts, the judge of the High Court and the judge of the Court of Appeal ruled to that effect. Then, at a later date, an appeal was heard in the other place, a legal argument altered that view, and from that date the gifts made for Easter offerings attracted tax.
It can be argued that it cannot be a very strong argument for the Inland Revenue to suggest that it would be


extremely complicated to unravel this affair so that Easter offerings should not attract tax if, in fact, there was an argument at a high level to the effect that they should not attract tax. Consequently, I feel that this in itself is a powerful argument for such offerings not attracting tax.
Although, in the proposed Clause, there is no limit to the amount set, I am sure that hon. Members who have associated themselves with me in the proposed Clause will feel, as I do, that if the principle is accepted by the Chancellor in some form, perhaps with a limit, there would be no objection to that. On the other hand, it is my belief that it would not be worth while making the approach purely by putting a small limit upon it when the total sum of money is not likely to be large.
Hon. Members no doubt know very well the form of argument which has frequently been used in defending this type of Clause. It is that if anyone likes to give an incumbent a cheque at a time other than that of Easter offerings, and it is merely as a gift, it does not attract tax. Consequently, it becomes ridiculous that such a form of subterfuge should have to be resorted to from time to time to correct a situation which a great number of people think ought not to exist.
After all, when people go to their place of worship on Easter Sunday to give what they feel disposed to give as an offering to their minister, surely it is wrong, when it is known that the recipients have not a great amount of money, that taxation should be imposed upon what is nothing more than a gift.
I feel comforted by the fact that in 1946, and again in 1948—on that occasion Sir Patrick Hannon and I acted as Tellers —we were supported by many hon. Members who are present tonight. The supporters included the present Minister of Agriculture, Fisheries and Food, the Economic Secretary to the Treasury, the Minister of Pensions and National Insurance, and the Foreign Secretary.
I therefore trust that the force of the argument will have a softening effect upon the Chancellor. I feel that this year we have our last chance, so I hope that my right hon. Friend, in spite of the arguments which the Inland Revenue has advanced for a very long time, will accept our case and do something about it, believing that the people would think it

right that he should in some measure accept the principle underlying the Clause.

Brigadier Prior-Palmer: I support the proposed new Clause. I had tabled a similar Clause which has not been called. For two reasons, I did not go as far as my hon. Friend the Member for Bodmin (Mr. D. Marshall) has gone. First, I felt that there are some parishes which are so rich that they are not affected or worried by this matter. Secondly, I felt that if one asked for something small one might be more likely to get it. Nevertheless, I support the Clause before the Committee.
It is difficult to define "charity", or to find any real definition of a "charitable gift". There is an Elizabethan Statute dealing with charitable uses which has been referred to ever since it was introduced, but a large number of very curious items are enumerated in it, and they are not confined only to charitable intent. During the course of time the definition of "charity" has become wider and wider. For example, on one occasion it was described as the promotion of temperance, and Income Tax relief for it was given.
The definition has also covered the performance of choral work and the provision of regimental plate. If the provision of regimental plate can be regarded as a charitable matter, I should have thought that the plight of the clergy, who, faced with the rising cost of living, find it increasingly harder and harder to carry out their duties without worry, and who sometimes are sore put to it to find three meals a day, was an even more pressing subject for consideration in this direction.
10.30 p.m.
It is entirely wrong that well-meaning and normally upright people should be driven to descend to all sorts of devices to try to circumvent the law in the interest of religion. It really is high time that this anomaly was wiped out and that these good people who give their lives to teach religion in return for a very small pittance indeed should be given a square deal.

Mr. E. Fletcher: I wish to support the new Clause. For a long time I have thought it a blemish on our fiscal arrangements that Easter offerings are taxed. As the hon. Member for Bodmin (Mr. D. Marshall) pointed out, that was not the


case for some sixty years. It is only by a comparatively recent decision that Easter offerings to ministers of religion have fallen within the Chancellor's net. The Chancellor knows perfectly well that there is a very large volume of opinion on both sides of the Committee, among people of all denominations and among those of no denomination, that the taxing of Easter offerings is something inconsistent with the highest traditions of this country.
Ministers of religion are not well off. They are one of the hardest-hit sections of the community. They are not organised as are some other sections of the community, which enables them to protect themselves against rising costs, inflation, and so forth. Every one of us, I suppose, knows a minister of religion, perhaps several, who, if not living in penury, are living in very straitened circumstances, but who because of the noble calling to which such men belong, and because of the Christian principles which they uphold, do not complain.
This Clause is being moved for humane and Christian motives by people who are very sensible of the conditions under which, unfortunately, a large number of clergymen in this country live. It is high time that the Chancellor recognised the justice of this claim. It is true that the matter has been debated before, and no very Convincing arguments have ever been adduced against the merits of this Clause. We have heard it said that there are administrative reasons which make such a concession difficult, that it might open the door to other concessions.
I do not believe that. I believe that it would be quite easy to limit this concession to ministers of religion and, if necessary, to limit it to Easter offerings. The Chancellor will know that the Easter offerings by parishioners are a tradition going back many centuries. The rich man makes his gift and the widow contributes her mite. All those contributions are brought within taxation. It is felt to be almost indecent and repulsive that the more generous people are to their pastors at Easter time the more goes into the Chancellor's pocket. That is not the idea of these contributions.
In other respects the Chancellor has, in this Finance Bill, shown himself refreshingly—if that is the right word—

indifferent to the views of the Inland Revenue on matters of major importance, such as the taxing of overseas trade corporations; therefore, he should be the last person in this Committee to give us any trumped-up arguments based upon Inland Revenue briefs. We want the Chancellor to exercise his own judgment fearlessly, and to over-ride any Departmental prejudices that exist in this minor matter as he has done in regard to major ones. If he accepts the Clause he will be doing himself honour and remedying a longstanding grievance and injustice.

Sir C. Mott-Radclyffe: I hope that the Chancellor and the Committee have listened carefully to the very moving appeal made by the hon. Member for Islington, East (Mr. E. Fletcher). There are one or two points which should be made about the new Clause. The fact that it has become known as the hardy annual Clause, and has been discussed four or five times in recent years, does not make it any the worse.
I agree with the hon. Gentleman that of all sections of the community it is the clergy who have probably been hardest hit in the last twenty years. I challenge anybody to deny that the clergy have suffered a tremendous drop in their standard of living. One finds them in the country eking out a very difficult existence in enormous vicarages, with large gardens full of weeds; perhaps with a wife and young children; and no domestic help, with less money coming in at the end of the week than many of their parishioners living in council houses or agricultural cottages who have no need to try to keep up appearances.
But that is not the strongest argument in favour of the Clause. The Chancellor may quite well follow the example of his predecessors and say, "If the clergy are underpaid it is up to the Church as a whole to do something about it," but the real argument in favour of exempting all or part of the Easter offering from tax is a slightly different one.
I do not think that it is right that a gift made voluntarily without any compulsion at all, by parishioners to parish priests on Easter Sunday. should attract tax. The days are gone when the Easter offering was compulsory in many parishes. I do not believe that it is now very often possible to say with accuracy what the


Easter offering will amount to in a given parish. Figures are published which in my view bear no relation to reality.
I know of parishes where the Easter offerings vary by as much as 50 per cent. from year to year, depending upon whether Easter is early or late, and upon the size of the congregation on the day. The Easter offering can no longer be said to be a certain amount which can be regarded as part of the yearly salary of the incumbent. In the first sixty years of Income Tax—from 1844 to 1907—the Easter offering was not considered subject to tax at all.
I ask my right hon. Friend to think carefully about the absurd anomalies which have arisen from the fact that the Easter offering attracts tax and, as in past years the standard rate of Income Tax has gone up, the anomalies have become more absurd. If I give the parson a turkey at Christmas, he does not have to pay tax on its value. Were I to give him a cheque at Christmas with which to buy a turkey, he would not have to pay tax on the value of it. Similarly, if I gave him a cheque on Easter Sunday to help towards the cost of his summer holiday, he would not have to declare the amount for Income Tax purposes. But if I put £1 into the offertory plate on Easter Sunday, that could attract tax at the standard rate. It seems to me to be completely absurd.
I have been studying what has been said about this matter in the debates which have taken place since the war and I find that the clergy have been bracketed with some rather odd types. They have been classed with waiters, jockeys, and others, who are supposed to return the value of tips which they receive in order that the amount may be assessed for tax purposes. I wonder whether all the waiters make a correct return of all their tips, or whether the postmen who receive presents on Boxing Day make a return of them.
Many employers make gifts to their employees at Christmas which do not have to be returned for tax purposes, and I cannot believe it is right that the gifts made to a parish priest on one of the two great festivals of the Christian Churches, as a kind of token of regard for his work throughout the year, should be taxed. It does not seem decent or dignified that such money should attract tax. I should

like my right hon. Friend to state what would be the cost of exempting the whole of the Easter offering or, as is suggested in another new Clause in the name of myself and some of my hon. Friends, exempting the first £75. I beg him to think carefully about what we are asking, because I am sure that if he does so he will see that it is not unreasonable.

Mr. P. Thorneycroft: It might be convenient if I said a word about this Clause now. As was said by my hon. Friend the Member for Bodmin (Mr. D. Marshall), this is not a new debate. This matter has been debated over and over again. A few hon. Members must have voted both ways on this question during the course of their parliamentary careers. When I came to the Exchequer I was conscious that I should be confronted with this matter, so I have given some thought to what is the right thing to do.
So many speeches have been made in the past on this subject by so many Chancellors that every possible argument has been adduced and they are all well known. Over the years they have been regarded by successive committees which have considered this matter as irresistible arguments against this reform. But I am not satisfied that that should necessarily be the end of the matter—[HON. MEMBERS: "Hear, hear".] Hon. Members should not anticipate too much.
10.45 p.m.
The arguments for this reform are that this is a personal gift; that it is very often a gift to a man in very poor circumstances, and that there is something distasteful in taking tax from it. On the other hand, the short point in favour of the tax is that the gift is part of the minister's income; and that these clergymen do, in fact, receive part of their income as voluntary gifts. It matters not when the gift is made, whether as an Easter offering or as a cheque at any other time. As part of the clergyman's income it is liable to tax.
One cannot dismiss lightly an inroad into that provision; many other people get their incomes in that way. In any event, I do not think there would be any case for Easter. The Churches vary very widely. Some give gifts of this kind at Easter; other make a habit of it at Whitsuntide. Many do not make a habit of it at all. The Church of Scotland and the Free Churches do not deal with the


matter in that way. Nevertheless, the fact remains that in any denomination these are not very wealthy people.

Dame Irene Ward: On small fixed incomes.

Mr. Thorneycroft: The trouble is that the proposed provision would be of least help to the poorest. My hon. Friend the Member for Tynemouth (Dame Irene Ward) reminds me of another point that should be made in this connection. If one is to give relief on, say, the first £75, one is dealing with people who are barely within the Income Tax range at all.
In any event, I have been pondering on these matters and have been considering what the Royal Commission had to say upon the subject of taxation of the clergy. It made the suggestion that the annual value of Church of England parsonage houses should cease to be attributed to the incumbent as income, and that the restriction of the exemption from taxation in respect of lands and properties owned and occupied by charities, which is imposed by Section 448 of the Act of 1952, should be repealed. That was an aspect of the matter which could not be entirely dismissed.
I took the opportunity of discussing the problem with representatives of the Churches, because we want to have the views not only of the Church of England but of other Churches. It is unrealistic to think that we can consider one denomination in isolation. What impressed me was that all Churches thought that something should be done, but each would benefit from a different type of relief. In some cases, relief on the first £50 of the Easter offerings might be of assistance. Others attached importance to some adjustment in the expenses arrangements for clergy. That is a difficult thing to do in isolation from other people. Other denominations felt that some relief on account of Schedule A would be of benefit. They all emphasised that some form of tax adjustment would be of assistance to them.
It would not be satisfactory to deal with this matter piecemeal, as it raises different points of taxation principle. Before the next Budget, I will closely study all these proposals and see whether, without violence to long-established

principles, it is possible to give effect to the desire to assist and encourage ministers of religion and the churches generally. I cannot make any promises, but I will see whether anything can be done. In the course of the review I will consider the remarks which have been made during this debate.
This is not so simple a matter as it seems. It is not really right to make a rule in this respect in reference to matters which, perhaps might benefit considerably one denomination, without considering others. The Committee may well think that I am right in seeing the Churches and having a talk with representative bodies to see what the possibilities are. I should like a little time, between now and the next Budget, to talk matters over with them in order to see whether it is possible—I do not make any promises—for us to do anything to help.

Mr. H. Wilson: The whole Committee will wish to welcome what the Chancellor has just said, so far as it carries with it a very specific promise to examine this matter seriously, with a view to doing something next year. I think also, speaking, at any rate, for myself—and I am sure that I carry a number of hon. Members on both sides with me—that we welcome the fact that he is looking at this in a wider denominational setting than is represented by the specific new Clause we have on the Notice Paper. I am sure that that would be widely welcomed.
All of us have felt for a very long time that something should be done. We are all impressed by the arguments which have been produced by successive Chancellors, emanating from the Board of Inland Revenue, in various debates. Certainly, in theory, there is great difficulty in accepting the new Clause.
The Chancellor has fairly said that the matter has been put by Chancellors of different parties over a considerable period of time. Indeed, the present Prime Minister, we were reminded tonight by the hon. Member for Bodmin (Mr. D. Marshall), himself pressed very strongly for the acceptance of a new Clause on similar lines many years ago—from this side of the Committee, of course.
We should have wanted to know, I think, in other circumstances, but for the Chancellor's speech, whether the present


Prime Minister had been converted from that point of view, or whether the Chancellor was breaking loose from the Prime Minister. But the way that the Chancellor has put it enables us to avoid that kind of difficulty.
The Chancellor is quite right, in my view, speaking as a Nonconformist, in saying that what would meet the views of hon. Members on both sides of the Committee who have spoken to this new Clause would be of little or, indeed, no use for certain other denominations who have their financial problems and their very specialised tax problems. We are all glad that he has had talks with the representatives of the churches generally about the matter and has undertaken to keep in touch with them in the future.
Yesterday, I happened to be at a joint service—a very rare thing—representing all the denominations in the Hampstead Garden Suburb, which was celebrating its jubilee, at the parish church in the constituency of the hon. Gentleman the Member for Hendon, South (Sir H. Lucas-Tooth); I do not think that he was at the church, but no doubt he had a good reason for not being there. I remember that, as we came out, in chatting to one or two of the people there from more than one church, I brought up the question of this new Clause that we are debating tonight. It was quite clear then that it would have a value very different for some of those attended that service from what it would have for others. There is a serious problem in regard to the occupation of manses, as I think the right hon. Gentleman knows; and this has been mentioned this evening.
The right hon. Gentleman has undertaken to look at the matter between now and the next Budget. I do not think that it would have been a case for the appointment of a committee to go into it. It is necessary to find out what the needs and requirements are, find out what will give the greatest benefit and the greatest equity as between the different Churches, and then take a view about it. So far as any committee could look at it, that was done by the Royal Commission.
I think that the Chancellor is right, on this occasion, not to set up any special inquiry. I would, however, ask him to consider whether it would not be a good thing—there is no big point in it, and there is not likely to be a great gamble

on the Stock Exchange on the consequences of any decision—to associate representatives of the other parties in the House in the discussions. I do not ask him for a reply tonight, but I should like him to consider that.
None of us wants this issue to become a party issue, and, if possible, we want to avoid it becoming too much a denominational matter. Above all, we do not want within the House of Commons to feel that certain denominational views are more likely to be pressed from one side of the House than from another on this matter. The Chancellor would not lose anything by accepting that suggestion and we would help to get away from the situation about which all of us are a little concerned and on which the Chancellor, with great frankness and some degree of cynicism, commented when he said that there were some hon. Members who voted both ways on this issue, suggesting that it was not any conversion which caused them to change their view, but the question on which side they were sitting.
Perhaps the right hon. Gentleman might be able to associate right hon. and hon. Members from other parts of the House of Commons in these discussions so that, if possible, we can take this issue out of politics and out of future Budget debates and devote ourselves to the other Clauses that will be on the Notice Paper in successive years.

Mr. Nicholson: I think it right for somebody on this side to thank my right hon. Friend the Chancellor for going as far as he has done. There are, however, one or two points that I should like to make. First, this is no new problem. Chancellor after Chancellor has had these cogent arguments put to him and nothing has been done. I hope my right hon. Friend will realise that it takes a considerable act of faith on our part to accept as satisfactory a vague pledge that he will, at least, look at the matter without saying that he will do anything definite. He is drawing a large cheque on our bank of faith and I hope that he will honour it.
Secondly, there is the more serious consideration that for years and years every section of the House has wished for this reform, but nothing has been done about it. There is something seriously wrong constitutionally when the


universal will of all parties in the House of Commons is consistently ignored by the Chancellor and the Treasury representatives. Although it may seem trivial, it is a serious constitutional matter that the will of Parliament and of the country has not been carried out.
I hope that my right hon. Friend will regard this matter as one of high priority and of the greatest importance. Having said that, I do not wish to appear ungenerous. My right hon. Friend has come much further much faster than any of his predecessors have done and I welcome it. I hope he will realise that this is a very serious matter indeed.

Mr. Ede: I should like to thank the Chancellor of the Exchequer for the wide view he has taken of this matter. One of the difficulties that confronts those of us who belong to some of the smaller Nonconformist denominations is that the case that has been put forward tonight on behalf of the new Clause does not touch our problems at all.
We have to make regular weekly contributions of small sums for the maintenance of the ministers of our Churches. The idea of one special Sunday, when one does something out of the ordinary in that direction, does not affect us at all. Many of our people have to make great sacrifices indeed to maintain a regular ministry within the Churches. Therefore, the problems that the right hon. Gentleman has mentioned, which have been brought to his attention by the representatives of our denominations, press on us very much and occasionally cause considerable hardship on the men who are called to the ministry.
11.0 p.m.
One of the problems is that much depends sometimes on the view of the local Inland Revenue officer of the way in which certain expenses, which some of us regard as essential, should be treated, and whether they should be allowed for exemption from tax or not. There is this problem, also, that some of our ministers are regarded as self-employed and so cannot have the allowances which are made to certain other ministers who are regarded as being in the employment either of the Church as a whole to which they belong, or of a local cause. These difficulties could not be resolved by the acceptance of this new Clause.
I know from my own experience as an officer of my own denomination that there is a feeling generally among the churches that this matter should be dealt with on the wide lines indicated by the right hon. Gentleman. I am not as lacking in faith in him as is the hon. Member for Farnham (Mr. Nicholson), but, of course, he knows the right hon. Gentleman better than I do. I would assure the right hon. Gentleman that the speech he has made tonight, his wide outlook, and his generous recognition of the diverse problems which have to be solved, will be met with a spirit of equal co-operation by the various denominations, and I wish him and the representatives of the denominations every success in the negotiations which will be carried on during the coming year.

Mr. John Mackie: I am in complete agreement with my hon. Friend the Member for Farnham (Mr. Nicholson) about the clergy of the Church of England and Easter offerings, and also with what has been said by such a leading representative of one of the great Noncomformist bodies as the right hon. Gentleman the Member for South Shields (Mr. Ede), but I think it is only fair to point out that in this island of Great Britain there are two Established Churches, the Church of England and the Church of Scotland. One represents only 5 million people, but has 1 million communicants. The Church of England cannot claim any number of communicants, because it has no communion roll whatever. [An HON. MEMBER: "Rubbish."] It is not rubbish; let me tell my hon. Friend the Member for Kidderminster (Mr. Nabarro)—

Mr. Gerald Nabarro: I did not utter a word. I certainly did not say "rubbish". I hope that my hon. Friend will unreservedly withdraw the implication.

Mr. Mackie: I thought that my hon. Friend said "Rubbish".

Mr. Nabarro: It was not I, but an hon. Friend of mine behind me.

Mr. Mackie: Before this unlooked for intervention I was saying that in the Established Church of Scotland there is no provision whatever by way of Easter offerings, because the Church of Scotland up to now—one does not know what


may be the case in future, in view of present proposals—for its own good reasons and of its own choosing has not observed the churches' year.
I thought it only right to point that out because of the two Established Churches one certainly would not benefit by the new Clause or under the suggestions of the right hon. Gentleman the Member for South Shields. I thought it right that the position of the Church of Scotland, which represents a majority of the people, and possesses considerable privileges, should be pointed out.

Dr. Horace King: I am sure that the hon. Member for Bodmin (Mr. D. Marshall), who moved the new Clause, like every other hon. Member of the Committee, will be pleased at the tone and character of the Chancellor's reply. I am glad that he has broadened the question. There is no doubt that the new Clause is certainly not broad enough. Many church folk make gifts to the clergy on other occasions. As my right hon. Friend the Member for South Shields (Mr. Ede) has pointed out, there are many denominations which make gifts to their clergy in other ways. I hope, therefore, that between now and next year the Chancellor will carry out his pledge.
I was particularly interested to hear that the right hon. Gentleman is to consult the various church folk about ways in which he can help them. The Committee behaves hypocritically, however, if it thinks that this is the answer to the clergys' problem. The real trouble is that we under-pay our clergy, that most of them are living on stipends, salaries or wages which are very little above their pre-war incomes, and that anything the Chancellor can do can merely improve their position ever so slightly. If the Committee means what it has been trying to say in debate, the solution is not merely a fiscal one and not merely a minor tax concession. The solution is for us to get back into our Churches and see that we no longer pay the clergy the low rates for the job that we pay them at present.
I hope that in his broader search the Chancellor will not neglect the principle underlying the new Clause, that is, that people who give freely out of affection and love do not want part of their gift to go to the Government. They want the

gift to be made to the person whom they wish to benefit. If, after years of faithful service, a man is given a gold watch, the Chancellor does not impose Income Tax on the presentation, much as he might like to do so. I hope that presentations made by people out of warm respect for their clergy will be free some day from tax.

Mr. D. Marshall: I should like to thank my right hon. Friend the Chancellor for what he has said and the spirit in which he said it. I believe that all right hon. and hon. Members present have faith in what my right hon. Friend has said and believe in his intention to try to do something in the course of the next year. I therefore beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

To report Progress and ask leave to sit again.—[Mr. P. Thorneycroft.]

Committee report Progress; to sit again Tomorrow.

PURCHASE TAX (COMMERCIAL ROAD VEHICLES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hughes-Young.]

11.9 p.m.

Mr. Gerald Nabarro: The subject I wish to raise tonight is, I think, one of considerable interest to every hon. Member. It has been regarded a rule of this House, on grounds of order, that matters affecting variation of Purchase Tax rates could not be dealt with on the Motion for the Adjournment, presumably on the premise that they involved legislation. In fact, as recently as 20th December last, the then occupant of the Chair intervened during a speech of the hon. Member for Coventry, North (Mr. Edelman), who was pleading for a reduction in rates of Purchase Tax on motor cars, and told him that he was out of order, whereupon the hon. Member desisted and passed to a different aspect of his subject. I am sure, with great respect, that the hon. Member was dissatisfied with that Ruling. Also, it recently became a matter of controversy at Question Time, and the right hon. Member for Huyton (Mr. H. Wilson) suggested that it would be out of


order for me to raise a matter of purchase tax rates on the Motion for the Adjournment.
I am grateful to Mr. Speaker for giving a Ruling in clear and unmistakable terms about this matter. It is to the effect that so far as Purchase Tax rates may be varied by Treasury Order—which is, of course, the fact under Section 21 of the Finance Act, 1948—it is in order for hon. Members to plead for such a Treasury Order to vary the rates of Purchase Tax during the Adjournment debates.
So far as my researches tell me, this is the first occasion since 1948—in nine years—that any question relating to Purchase Tax variation has been raised on the Adjournment. Therefore, I create a precedent this evening happy in the knowledge that there will be innumerable hon. Members in the years ahead who will similarly plead for Purchase Tax variations on the Motion for the Adjournment, especially as the Treasury has the unhappy habit of drawing Resolutions in such a way as to make it impossible to raise many such matters during the passage of the Finance Bill. We now have the alternative recourse of doing so on the Adjournment.
The particular Purchase Tax to which I refer tonight is a large one, namely, the Purchase Tax on commercial vehicles. It will be recalled that the tax on commercial vehicles chassis was imposed by Sir Stafford Cripps in the Finance Bill of 1950. At that time the rate applied was 331 per cent. On 15th April, 1953, it was reduced to 25 per cent., and on 27th October, 1955, it was raised to 30 per cent., where it now stands.
This is a unique facet of Purchase Tax, because the only item of industrial capital equipment which is subject to the tax is the chassis of commercial vehicles. As these vehicles are used by industry solely for the purpose of transportation of goods and to provide distributive services in all parts of the country, I think it may be claimed that it becomes a direct charge not only upon the capital assets in industry but also upon the cost of distribution
I mentioned earlier that it is a large item of Purchase Tax. In justification of that, I would mention that the tax raised on commercal vehicle chassis has amounted to no less than £69·1 million

over seven years since it was imposed in 1950, and while the yield in the first full year, 1950–1, was at the modest rate of £4·1 million, it has now become £12½1 million in a full year. That shows the growth in the rate of revenue from this source.
When the tax was imposed, opposed by the whole of the Conservative Party then in opposition, it was claimed that it was necessary for two reasons; first, to discourage investment in industry at home, and, second, to stimulate the export trade. I doubt whether seven years later either of those reasons may be held to be valid. First, with regard to the question of investment in industry, the economic and fiscal policy of my right hon. Friend, as I understand it, certainly does not consist of discouraging investment in those classes of equipment which can give the greatest possible assistance to improved and increased efficiency, and transport, with land, labour and capital, is an essential ingredient in production of every kind in the United Kingdom. In fact, how could this form of Purchase Tax have discouraged investment when we consider that the number of commercial vehicles operating in this country in 1950 when the tax was imposed was about 843,000 and has increased in only seven years to the phenomenal figure of about 1,175,000, an increase of approximately 35 per cent.? It is evident, therefore, that the imposition of this heavy Purchase Tax has done nothing whatever to discourage investment in new commercial vehicles. On the contrary, the rate of growth is, so far as I am aware, greater than at any time in the history of commercial motor vehicles.
As to the export trade—and a second reason given at the time of the imposition of this tax was that it would help to increase exports of these vehicles—the rate of growth has been dubious to say the least. In 1950, we actually exported 164,909 commercial vehicles out of a total production of 262,702. In other words, we exported 62·8 per cent. of all the commercial vehicles produced in this country. In 1956, the last full year for which figures are available, we actually exported 130,593 commercial vehicles out of a total production of 298,609, or 43·7 per cent. So, the facts are that when the tax was imported we exported 50 per cent. more vehicles than we exported last year.
Thus, not only has this tax failed to discourage investment in new vehicles at home—the first reason given for its imposition—but it has also failed to increase exports; the second reason. In fact, the rate of shipments of these vehicles has substantially declined as between 1950 and 1956, and I claim that it is stupid to tax one type of capital equipment for industry which is used for the transportation and distribution of goods when we fail to tax, say, a railway locomotive or wagon, or a Bristol freighter aircraft. They, after all, are only alternative means of transporting goods around this country. It would be just as stupid to tax a railway locomotive or a transport aircraft; or a railway wagon.
Secondly, no person or company engaged in industry or in the processes of transportation buys a commercial vehicle for fun. It is not an article used for pleasure purposes. It is an essential article for trade and production needs and for distribution, and there is, therefore, no parallel between it and a private car; and on that ground as well the matter should be considered at an early date.
Thirdly, there is no unfilled export demand for commercial vehicles. Manufacturers assure me that they are very anxious to sell overseas but that they are already selling all they can. Fourthly, this tax represents a serious burden on the cost of production at a time when, despite every kind of vicissitude, we are trying to hold prices and costs stable. The large figure of more than £13 millions, which is the estimate of the yield from this tax this year, has to be added to the costs of production in industry, and distribution.
Furthermore, the withdrawal of this tax would go a long way towards encouraging newer and more efficient vehicles being produced; and tend to bring an end to the temptation to overwork vehicles beyond the period of their normal, efficient and useful life. In that context, it can be pointed out that the withdrawal of this tax would be an aid to road safety.
The House might have some regard for these words which are important, bearing as they do on this heavy tax on commercial vehicles. The words are quoted from a debate of 15th June, 1950, and summarise the arguments which I have

been putting in different form this evening. The passage reads:
I agree with the Economist in this matter. It said: A heavy and damaging fiscal bludgeon is brought into play which, it is hoped, will re-establish the Divine rightness of planned guesswork at the mere incidental cost of making transport of goods more expensive.' The tax is certainly clumsy. It is an utterly indiscriminate tax. It includes every type of commercial vehicle, broadly speaking, and it makes no distinction between those which are essential and those which are less essential, those which have an export market and those which have not an export market. It taxes the little milk trolley. Why we should want to tax a thing of that kind I do not know. It taxes it just as much as the £10,000 special type of vehicle far carrying frightfully-needed export goods to the docks. It is a vicious and vindictive tax which is calculated to hit at the small man particularly. The monopolies will manage all right, but they are busily engaged in squeezing out the small man. The tax will help to smash competition, and it will be passed on to the consumer in higher charges. It is a tax on capital goods. We say that a tax on capital goods in this country at the present time is thoroughly evil. It imposes a special and distinctive burden upon the industry of this country rather than upon the industries of other countries. The tax is designed to increase the cost of distribution at a time when Ministers of the Crown have the hypocrisy to talk about the importance of bringing down the cost of distribution. The tax has been roundly condemned by all sections of political opinion. We ask the right hon. Gentleman and hon. Gentlemen apposite to stop talking about the importance of bringing prices down and to start taking action to bring them down. The most effective way to do that would be to vote in favour of the Amendment tonight.
These words bear the characteristic imprint of the utterances of my right hon. Friend the present Chancellor of the Exchequer, who was at that date leading the Conservative Opposition in attacking this tax. My right hon. Friend was supported amply on that occasion by the present Economic Secretary to the Treasury and was also supported by my hon. Friend the Financial Secretary to the Treasury. He was also supported in a speech which I was privileged to contribute on that date to an Amendment of the Finance Bill which was lost on that occasion by the meagre margin of ten votes—295 to 285.
The right hon. Member for Battersea, North (Mr. Jay), the then Financial Secretary to the Treasury, said in column 581:
particularly when it is remembered that this tax is not intended to be permanent—[Laughter.]—but is needed only as long as the necessity for restraint on our investment programme and the maximum of exports are paramount.


That is what we in the Conservative Party were attacking. This is a unique facet of Purchase Tax. There is no other article so taxed in this country.
I claim that though the Chancellor may not be able to afford the loss of revenue of £13 million in a full year, he must give urgent consideration to the matter at an early date with a view to relieving the whole of British industry of what I believe to be a pernicious burden inimical to the interests of our entire economy. I plead on the Adjournment Motion, as you, Mr. Speaker, have so kindly ruled that it is proper for a Private Member so to plead, that a Treasury Order be introduced at an early date to bring this Purchase Tax on chassis of commercial vehicles to a timely and unlamented end.

11.25 p.m.

Mr. Maurice Edelman: As I was saying a few months ago when the Chairman of Ways and Means interrupted me, this is a thoroughly bad tax. I am obliged to the hon. Member for Kidderminster (Mr. Nabarro) for raising this matter tonight and giving me an opportunity of concluding a few sentences which I began on that occasion. He quoted the Chancellor of the Exchequer, and I would like to reinforce what he said by a quotation from the present Economic Secretary who, in the course of the same debate in 1950, said:
…people do not buy lorries for fun but in order to carry on their business efficiently. …We consider this proposal "—
to put Purchase Tax on commercial vehicles—
to be basically wrong.
The present Chancellor and the present Economic Secretary were replying to the argument then advanced by Sir Stafford Cripps. I shall quote briefly from what he said, namely:
The point is, whether we rightly or wrongly have taken this view, that there is over-investment on this item "—
commercial vehicles—
and the proper method to stop over-investment is to apply fiscal methods such as we suggest.…We believe that markets will be found overseas for these vehicles, and that it will not be necessary to contract the industry."—[OFFICIAL REPORT, 15th June. 1950; Vol. 476, c. 572–624.]

In other words, the Chancellor was then suggesting that fiscal methods should be used as a technique of control in order to direct the commercial motor industry into the export markets and reduce investment at home.
I believe that the only really effective method, and the only appropriate method, of controlling the motor industry is to nationalise it either in whole or in part.

Mr. Nabarro: An absolutely ruinous suggestion.

Mr. Edelman: In the meantime, if fiscal methods are to be introduced, let them be efficient methods. The present tax is wholly inefficient, even by the standards advanced by Sir Stafford Cripps seven years ago, which have been defended by successive Chancellors ever since.
The hon. Member for Kidderminster quoted some interesting figures, and I shall reinforce them with one set of statistics. When the tax was introduced in 1950 the home production of commercial vehicles was 97,793. Bearing in mind what Sir Stafford Cripps said then—that the object of the tax was to discourage investment at home—let us consider what happened in 1956. In that year the relevant figure rose to 168,016. That shows that in the matter of home production and investment the tax has proved to be a lamentable failure. Let us turn to the question of the export market. In 1950 the export proportion was 62 per cent. Successive Governments slapped on a tax varying from 25 per cent. to 331/3 per cent., and back to 30 per cent., but the net result has been that in 1956 the export percentage had fallen from 62 per cent. to 43.7 per cent.
Those are very important figures. Whatever else they prove, they prove absolutely conclusively that Purchase Tax on commercial vehicles has wholly failed in the purpose designed for it by Sir Stafford Cripps and maintained by successive Chancellors since 1950.
Today the tax is wholly irrelevant as a technique of control. It is punitive, in that it lays a very heavy burden not simply on the producer of motor vehicles but, more than that, upon the consumer, because it is he who ultimately has to pay what amounts approximately to a tax


of £13 per annum on commercial vehicles used by relatively small distributors.
Considered from every possible angle this tax is irrelevant and inefficient—a source of revenue which can easily be replaced from other and more profitable directions. As far as the motor industry is concerned—and here I speak as one who represents a motor industry constituency, manufacturing commercial vehicles —the tax is wholly pernicious, and the sooner it is abolished the more quickly will the motor industry flourish and the cost of living, which is directly related to this tax, be brought down.

11.30 p.m.

Mr. Harold Gurden: I wish to voice the point of view of the small business man. The Purchase Tax added to commercial vehicles has immediately to be paid back in part in the form of tax allowance for depreciation, so that the Treasury does not get the whole of this money and stick to it. Small businesses are affected rather than larger ones, particularly in this time of the credit squeeze. Large organisations can afford to find the money, but the small business man is hard put to it to find the money. That is what makes the position so difficult for him. The small business man is discriminated against, people like dairymen, bakers and laundrymen. I ask my hon. Friend to convey to the Chancellor the fact that this tax is discriminatory.

11.32 p.m.

The Financial Secretary to the Treasury (Mr. Enoch Powell): I congratulate my hon. Friend the Member for Kidderminster (Mr. Nabarro) on having successfully asserted his right to raise this matter on the Adjournment. I am not sure that his example will be followed by so many hon. Members over the course of the years as he appeared to anticipate when they consider the reply which I must necessarily give. I know that my hon. Friend realises that, for the very reason which makes it possible for him to raise this matter, namely, that Purchase Tax can at any time be adjusted by Treasury Order, it would be quite wrong for a Treasury Minister, or indeed any other Minister, at any time of the year to give the impression of anticipating any decision of the Chancellor by commenting in any way upon the case for or against any modification of Purchase Tax.
However, my hon Friend has, with his customary force and clarity, put the case in this instance very plainly before the House, and I assure him that the arguments which he adduced, and those offered by the hon. Member for Coventry, North (Mr. Edelman) and my hon. Friend the Member for Selly Oak (Mr. Gurden), will be studied carefully by my right hon. Friend.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes to Twelve o'clock.